Answer to Question #25714 in Economics of Enterprise for Tammie Kish

Question #25714
The price of a laptop increases by 20% and there is a 40% drop in the quantity demanded, the price of a pack of cigarettes increases by 10% and there is a 5% drop in the quantity demanded, which of the two are more elastic and which is least elastic? and Why?
1
Expert's answer
2014-12-01T10:53:41-0500
The correct answer would be reversed. The formula to calculate Price Elasticity of Demand is:
PEoD = (% Change in Quantity Demanded) / (% Change in Price)

Therefore:
Laptops = -40% / 20% = -2 = 2 = Elastic
Cigarettes = -5% / 10% = -0.5 = 0.5 = Inelastic

PEoD Value = 0 = perfectly inelastic
PEoD Value = 0 > v < 1 = inelastic
PEoD Value = 1 = unit elastic
PEoD Value = > 1 = elastic

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

Assignment Expert
01.12.14, 17:58

Dear Derek, thank you for fixing us. The answer was corrected.

Derek
29.11.14, 03:12

The correct answer would be reversed. The formula to calculate Price Elasticity of Demand is:

PEoD = (% Change in Quantity Demanded) / (% Change in Price)

Therefore:

Laptops = -40% / 20% = -2 = 2 = Elastic
Cigarettes = -5% / 10% = -0.5 = 0.5 = Inelastic

PEoD Value = 0 = perfectly inelastic
PEoD Value = 0 > v < 1 = inelastic
PEoD Value = 1 = unit elastic
PEoD Value = > 1 = elastic

Leave a comment

Ask Your question

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS
paypal