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