Question

the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for envelopes elastic or inelastic? What is Julie's elasticity of demand?​

Answer 1

Her elasticity of demand is the absolute value of -0.8, or 0.8. Julie's elasticity of demand is inelastic, since it is less than 1.

Step-by-step explanation:

% Change in Quantity = (8 - 10)/(10) = -0.20 = -20%

% Change in Price = (3.75 - 3.00)/(3.00) = 0.25 = 25%

Elasticity = |(-20%)/(25%)| = |-0.8| = 0.8