If the price of apples rises from $3.50 a pound to $4.00, and my consumption of apples drops from 30lbs. of apples to 20lbs.; what would be the price elasticity of demand of apples. My figures are all wrong; how would I calculate it.
To calculate the price elasticity of demand, you need to use the formula:
Price elasticity of demand = (% change in quantity demanded) / (% change in price).
To calculate the percentage change in quantity demanded, you can use the formula:
Percentage change in quantity demanded = (New quantity demanded - Old quantity demanded) / Old quantity demanded * 100.
And to calculate the percentage change in price, you can use the formula:
Percentage change in price = (New price - Old price) / Old price * 100.
Let's apply these formulas to your example:
Old quantity demanded of apples = 30 lbs.
New quantity demanded of apples = 20 lbs.
Old price of apples = $3.50 per pound.
New price of apples = $4.00 per pound.
Percentage change in quantity demanded = (20 - 30) / 30 * 100 = -33.33%.
Percentage change in price = (4.00 - 3.50) / 3.50 * 100 = 14.29%.
Now you can plug these values into the price elasticity of demand formula:
Price elasticity of demand = (-33.33% / 14.29%) ≈ -2.33.
In this case, the price elasticity of demand for apples would be approximately -2.33. Since the value is negative, it indicates that apples are relatively elastic, meaning that a change in price has a relatively larger impact on the quantity demanded.