Posted by Randy on Wednesday, November 19, 2008 at 10:26am.
The question is, what is the for Math formula to show rather the demand of apples is Elastic, Inelastic, or Unitary Elastic
Thank You
Suppose the price of apples rises from $3.50 a pound to $4.00 and your consumption of apples drops from 30 pounds of apples a month to 20 pounds of apples. Calculate your price elasticity of demand of apples. What can you say about your price elasticity of demand of apples? Is it Elastic, Inelastic, or Unitary Elastic? Be sure to show the work.

Economics  drwls, Wednesday, November 19, 2008 at 10:34am
If the percent drop in consumption exceeds the percent increase in price. the demand is elastic. That is the case in your example.
See
http://en.wikipedia.org/wiki/Price_elasticity_of_demand

Economics  economyst, Wednesday, November 19, 2008 at 10:58am
Price elasticity is the percentage change in price divided by the percentage change in quantity.
%change in P = 100*(.50/3.50) =14.29
%change in Q = 100*(10/30) = 33.33
Elasticity therefore is 33.33/14.29 = 2.33
Since elasticity is > 1 (absolute value) it is elastic.
(Note: some economists prefer the midpoint method for calculating percentage change. here %change P is .5/3.75 and %change Q is 10/25).

Economics  Randy, Wednesday, November 19, 2008 at 11:39am
Thank You :)
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