Question

When the price of apples is $1.00 each a local farmer sells 500 apples. When the farmer increases

the price of apples to $1.20 she only sells 450 apples,
Please enter your answers as numeric responses (ie. 5 or 5%, not "Five" or "Five percent"). Do not
enter negative numbers rather just use the absolute value for all percentage changes (ie, if the
quantity decreases by 5% just enter 5% and not -5% or (5%)).
By what percentage did the price of apples increase? 20%
By what percentage did the quantity of apples sold decrease? 10%
What is the Price Elasticity of Demand (PED) for apples? 0.5
If the price of apples had increased by 10% by what percentage would quantity demanded have
fallen? 5

Answer 1

20%

10%

0.5

5%

Explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

Percentage change in price = (1.2/1) - 1 = 20%

Percentage change in quantity demanded = 450/500 - 1 = 10%