Respuesta :
Answer:
The price elasticity of demand for Twinkies in the given price range is 0.641.
Explanation:
The price of Twinkies is reduced from $1.45 to $1.25.
The quantity of Twinkies demanded increases from 2,000 to 2,200.
Price elasticity of demand for Twinkies
= [tex]\frac{\frac{Q2 - Q1}{\frac{Q2 + Q1}{2} } }{\frac{P2 - P1}{\frac{P2 + P1}{2} } }[/tex]
= [tex]\frac{\frac{2,200 - 2,000}{\frac{2,200 + 2,000}{2} } }{\frac{\$ 1.25 - \$ 1.45}{\frac{\$ 1.25 + \$ 1.45}{2} } }[/tex]
= [tex]\frac{\frac{200}{\frac{4,200}{2} } }{\frac{\$ 0.20}{\frac{\$ 2.70}{2} } }[/tex]
= [tex]\frac{\frac{200}{2100} }{\frac{\$ 0.20 }{\$ 1.35} }[/tex]
= [tex]\frac{0.095}{0.148}[/tex]
= 0.641
Answer:
The ped is 0.64 (rounded to 2 decimal places)
Explanation:
Elasticity is the responsiveness of quantity demanded or sold with respect to price holding all other factors constant
Price elasticity of demand (Ped) is the change in quantity demanded in a given market as a result of changes in pricing of goods or services offered in that market.
Ped = percentage change in quantity demanded/ percentage change in price
The mid-point method is carried out in three steps:
- Compute the average price and quantity given the changes in prices and quantity. In this case, average price is 1.35 ((1.45 +1.35)/2) and average quantity is 2100 ((2200 +2000)/2)
- Calculate the percentage change in both price and quantity. Using the price average as the denominator. the percentage change in price is 14.815 ((1.25-1.45)/1.35) and the percentage change in quantity is 9.524 ((2200-2000)/2100)
- Compute the Ped: 9.524/14.815 = 0.643
Note: the price elasticity of demand has no units
