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September 22, 2014

September 22, 2014

Posted by **steve** on Friday, September 14, 2012 at 1:09pm.

- economics -
**Susan Smith**, Sunday, March 16, 2014 at 2:47pm(a) Price Elasticity of demand of widgets

= (Change in Quantity of demand X/Original Quantity of demand X) divided by (Change in price of X/Original Price of X)

Change in Quantity = 15 - 25 = -10

Original Quantity = 25

Change in Price = (7 - 5) = 2

Original Price = 7

= (-10 / 25) / (2 / 7) = - 1.4

(b) As stated by the law of demand, when the price of a goods falls, quantity demand rises. The price elasticity of demand of widgets is greater than 1 so it is relatively elastic.

(c) I Demand is elastic if a specific percentage change in price results in a larger percentage change in quantity demanded. In such cases, Ed will be greater than 1. t is elastic.

Ed= (Change in Quantity/Sum of Quantities/2) divided by (Change in price/sum of price/2)

= -10/(40/2) / -2/(12/2)

= (-10/20) / (-2/6)

= -0.5/-0.3

= 1.5

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