Muliple Choice:
Pizza prices rose from $2 to $3 and quantity demanded dropped from 100 to 75 pizzas. Using the traditional method what is the price elasticity of demand:
2.0
-2.0
-0.5
none of the above
Elasticity is (%change in Q)/(%change in P). You have all the information you need.
To calculate the price elasticity of demand using the traditional method, you need to determine the percentage change in quantity demanded and the percentage change in price.
First, calculate the percentage change in quantity demanded using the formula:
% change in quantity demanded = ((new quantity demanded - old quantity demanded) / old quantity demanded) * 100
In this case, the old quantity demanded is 100 and the new quantity demanded is 75.
% change in quantity demanded = ((75 - 100) / 100) * 100 = -25%
Next, calculate the percentage change in price using the formula:
% change in price = ((new price - old price) / old price) * 100
In this case, the old price is $2 and the new price is $3.
% change in price = ((3 - 2) / 2) * 100 = 50%
Now, you can calculate the price elasticity of demand using the formula:
Price elasticity of demand = % change in quantity demanded / % change in price
Price elasticity of demand = -25% / 50% = -0.5
Therefore, the correct answer is -0.5, which is option C: -0.5.