When the price of corn dogs is $1.00, 5,000 corn dogs are demanded. When the price of corn dogs is $2.00, 2,500 are demanded. What is the price elasticity of demand for corn dogs?
% Change = (2500-5000) / 5000 = -0.50
Expressed as a decimal.
% Change in P. = (2-1) / 1 = 1.00
Expressed as a decimal.
PED = -0.50 / 1 = -0.50.
To calculate the price elasticity of demand, you need to use the formula:
Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
First, let's find the percentage change in quantity demanded:
Change in Quantity Demanded = Final Quantity Demanded - Initial Quantity Demanded
= 2,500 - 5,000
= -2,500
Percentage Change in Quantity Demanded = (Change in Quantity Demanded / Initial Quantity Demanded) x 100
= (-2,500 / 5,000) x 100
= -50%
Next, let's find the percentage change in price:
Change in Price = Final Price - Initial Price
= $2.00 - $1.00
= $1.00
Percentage Change in Price = (Change in Price / Initial Price) x 100
= ($1.00 / $1.00) x 100
= 100%
Now, let's calculate the price elasticity of demand:
Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
= (-50% / 100%)
= -0.5
Therefore, the price elasticity of demand for corn dogs is -0.5.
To calculate the price elasticity of demand (PED), we need to use the following formula:
PED = (% Change in Quantity Demanded) / (% Change in Price)
Now let's calculate the % change in quantity demanded:
% Change in Quantity Demanded = [(New Quantity Demanded - Original Quantity Demanded) / Original Quantity Demanded] * 100
Using the given information:
Original Quantity Demanded = 5,000 corn dogs
New Quantity Demanded = 2,500 corn dogs
% Change in Quantity Demanded = [(2,500 - 5,000) / 5,000] * 100
% Change in Quantity Demanded = (-2,500 / 5,000) * 100
% Change in Quantity Demanded = -50%
Next, let's calculate the % change in price:
% Change in Price = [(New Price - Original Price) / Original Price] * 100
Using the given information:
Original Price = $1.00
New Price = $2.00
% Change in Price = [($2.00 - $1.00) / $1.00] * 100
% Change in Price = [($1.00 / $1.00) * 100
% Change in Price = 100%
Now we can substitute the calculated values into the PED formula:
PED = (-50%) / (100%)
PED = -0.5
The price elasticity of demand for corn dogs is -0.5.
Note: The negative sign indicates that corn dogs are an inferior good.