Question #40515

Calculate point elasticity of demand for demand function Q=10-2p for decrease in price from Rs 3 to Rs 2

Expert's answer

Calculate point elasticity of demand for demand function Q=10-2p for decrease in price from Rs 3 to Rs 2

Solution

P1=3; Q1=10-2*P1=10-2*3=10-6=4

P2=2; Q2=10-2*P2=10-2*2=10-4=6; decrease in price ΔP=P2-P1=2-3=-1; decrease in demand ΔQ=Q2-Q1=6-4=2

Elasticity of demand is calculated by E=(P1+P2)*ΔQ/((Q1+Q2)*ΔP)=(3+2)*2/((4+6)*(-1))=-1

Solution

P1=3; Q1=10-2*P1=10-2*3=10-6=4

P2=2; Q2=10-2*P2=10-2*2=10-4=6; decrease in price ΔP=P2-P1=2-3=-1; decrease in demand ΔQ=Q2-Q1=6-4=2

Elasticity of demand is calculated by E=(P1+P2)*ΔQ/((Q1+Q2)*ΔP)=(3+2)*2/((4+6)*(-1))=-1

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Assignment Expert31.03.14, 18:23Dear ashwini. You're welcome. We are glad to be helpful. If you really liked our service please press like-button beside answer field. Thank you!

ashwini26.03.14, 12:02thanks a lot for the answer

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