# Answer on Economics of Enterprise Question 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?

Expert's answer

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

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

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## Comments

Assignment Expert01.12.2014 10:58Dear Derek, thank you for fixing us. The answer was corrected.

Derek28.11.2014 20:12The 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

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