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Chapter 5: Q.33 (page 131)

The equation for a demand curve is P = 48 鈥� 3Q. What is the elasticity in moving from a quantity of 5 to a quantity of 6?

Short Answer

Expert verified

The price elasticity of demand is 1.91

Step by step solution

01

Definition

The elasticity of Demand: Elasticity refers to the responsiveness of the quantity required by consumers in response to variations in the price of the good. Elastic demand is defined as demand that is larger than one, whereas inelastic demand is defined as demand that is less than one.

02

Explanation

The demand curve is: P = 483Q

AtQ=5,P=48-15=33AtQ=6,P=48-18=30

The quantity demanded reduces as the price rises. Let's use the average formula to calculate price elasticity:

% change in quantity=Qfinal-QintialAveragequantity脳100%

% Change in quantity =6-55.5脳100%=18.18%

% Change in price =Pfinal-PintialAverageprice脳100%

=30-3331.5脳100%=-9.52%

% Price elasticity of demand =

%changeinquantity%changeinprice=-18.189.52=-1.91

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