Posted by Randy on .
The question is, what is the for Math formula to show rather the demand of apples is Elastic, Inelastic, or Unitary Elastic
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.
If the percent drop in consumption exceeds the percent increase in price. the demand is elastic. That is the case in your example.
Could you please show me the workout on this ? Thank You
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 mid-point method for calculating percentage change. here %change P is .5/3.75 and %change Q is -10/25).
Thank You :)