Answer to Question #112772 in Microeconomics for syed ali

Question #112772
a)Price of Pepsi is Rs.120 and its quantity demanded is 300 bottles. Suppose due to Raman Pepsi company reduces price of it to Rs. 108 ,due to it its demand increases to 360 bottles. Calculate elasticity and also mention the type of elasticity.
1
Expert's answer
2020-04-29T09:21:45-0400

Price elasticity of demand is equal to change in quantity demand of a good as result of change in price of the good.

Ped= "\\frac{change in quanity demanded}{change in price}"

Change in quantity demanded = "\\frac{Q_i-Q_o}{(Q_o+Q_i)\/2}\\times100"

="\\frac{360-300}{(360+300)\/2}\\times100"

=18.18

Change in price = "\\frac{P_i-P_o}{(P_i+P_o)\/2}\\times100"

="\\frac{108-120}{(108+120)\/2}\\times100"

=-8.33

Ped= "\\frac{18.18}{-8.33}"

Ped= -2.18

Since the price elasticity of demand is greater than 1 in absolute value, the demand for Pepsi is 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

No comments. Be the first!

Leave a comment

Ask Your question

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS