The elasticity of demand between $1 and $2 is 0.6%, meaning it's elastic**. This indicates consumers are sensitive to price changes in this range, with a small increase leading to a relatively large decrease in quantity demanded.
The elasticity of demand between $1 to $2 is 0.6, which is elastic. This means that a 1% increase in price will lead to a 0.6% decrease in quantity demanded.
To calculate the elasticity of demand, we use the following formula:
Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)
Based on the graph, we can see that the quantity demanded decreases from 100 to 80 units when the price increases from $1 to $2. This represents a 20% decrease in quantity demanded.
The price elasticity of demand is then calculated as follows:
Price Elasticity of Demand = (-20%) / (100%) = -0.2
The negative sign indicates that the demand is inverse, meaning that the quantity demanded and price move in opposite directions. However, since the absolute value of the elasticity of demand is greater than 1, we say that the demand is elastic.
In other words, a small change in price will lead to a relatively large change in quantity demanded. This suggests that consumers are very sensitive to price changes when the price is between $1 and $2.