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

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

## Comments

Assignment Expert01.12.14, 17:58Dear Derek, thank you for fixing us. The answer was corrected.

Derek29.11.14, 03:12The 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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