Determine the coefficient of price elasticity of demand, if it is known that the initial price and volume of demand
January 25, 2021 | education
| Determine the coefficient of price elasticity of demand, if it is known that the initial price and volume of demand, respectively, were: P1 = 25 and Q1 = 80, after a price decrease by 5 points, demand increased by 20 units.
ED = (Q2 – Q1) * (P1 + P2)
P2 – P1Q1 + Q2
Decision:
1) 100% – 20/25 * 100% = -20% – this is how much the price has decreased;
2) 100/80 * 100% – 100 = 25% for so much demand has increased;
3) 25% / – 20% = -1.25 – price elasticity of demand;
Therefore, from this we can say that demand is not elastic.
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