91Ó°ÊÓ

• Elastic demand indicates the quantity demanded as a response to changes in price in a more than proportional manner.

Price elasticity of demand=

percentage change in the quantity demanded of a good or service/percentage change in the price.

Given equation,

P = 48 – 3Q.(the demand curve)

At Q=5

P= 48- 3$×$5

=48-15

=33

At Q=6

P = 48 – 3 $×$6

=48-18

=30

As price increases, the quantity demanded decreases.

.Price elasticity using the formula from percentage method,

percentage change in the Quantity = $â–³$in Quantity$÷$initial quantity $×$100, ($â–³$Q= Q₁-Q)

= 6 -5$÷$5 $×$100

= 20 %

percentage change in the Price = $â–³$in Price /initial price $×$100, ($â–³$P= P₁-P)

= 30-33 /33 $×$100

= -9.09 %

E_d = % $△$in Quantity demanded $÷$% $△$in price

= 20 / - 9.09

= - 2.20.

The price elasticity in moving from a quantity of 5 to

a quantity of 6 is - 2.20.