Question

T is estimated that if the price of a bar of chocolate is changed by 4%, demand will alter by 6%. * a. Calculate the price elasticity of demand of this bar of chocolate

Answer 1

Price elasticity of demand = 0.67

Step-by-step explanation:

Given the following data;

Percentage change in price = 4%

Percentage change in demand = 6%

To find the price elasticity of demand;

A price elasticity of demand can be defined as a measure of the responsiveness of the quantity of a product demanded with respect to a change in price of the product, all things being equal.

Mathematically, the price elasticity of demand is given by the formula;

`Price \; elasticity \; of \; demand = \frac {Percentage \; change \; in \; price}{Percentage \; change \; in \; demand}`

Substituting into the equation, we have;

`Price \; elasticity \; of \; demand = \frac {4}{6}`

Price elasticity of demand = 0.67