When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After lowering the price to $1.35 each, 510 hot dogs are sold every day.
At the original price, what is the price elasticity of demand for a hot dog?
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Ответ:
The price elasticity of demand for hot dog is -0.2
Explanation: Price elasticity of demand is the percentage change in quantity of a goods divided by the percentage change in the price of the goods
PED = %∆Q ÷ %∆P
STEP1: CALCULATE THE PERCENTAGE CHANGE IN QUANTITY
[(510 - 500) ÷ 500 ] × 100 = 2%
STEP2: CALCULATE THE PERCENTAGE CHANGE IN PRICE
[($1.35 - $1.50) ÷ $1.50] ×100 = -10%
STEP3: CALCULATE THE PRICE ELASTICITY OF DEMAND
2% ÷ (-10%) = -0.2
The price elasticity is -0.2 which means that the demand is inelastic. Demand is elastic when percentage change in quantity is greater than percentage change in price.
Ответ: