Question #97291

.) The following data refer to quantity of sweets demanded by students in given school.

Price (Kshs) Quantity demanded

1 100

1.10 80

Required:

i) Calculate the price elasticity of demand considering a price increase form Ksh. 1.00 to Ksh. 1.10.

(3.5 marks)

ii) Calculate the price elasticity of demand when price decreases from Ksh. 1.10 to Ksh. 1.00. (3.5 marks)

Price (Kshs) Quantity demanded

1 100

1.10 80

Required:

i) Calculate the price elasticity of demand considering a price increase form Ksh. 1.00 to Ksh. 1.10.

(3.5 marks)

ii) Calculate the price elasticity of demand when price decreases from Ksh. 1.10 to Ksh. 1.00. (3.5 marks)

Expert's answer

Solution:

Calculate the price elasticity of demand considering a price increase form Ksh. 1.00 to Ksh. 1.10.

Q2=80, Q1=100, p2=1.10, p1=1.00

"E= (80-100)\/(1.10-1.00) \\times(1.10+1.00)\/(80+100)\u2248-2.33"

Answer: -2.33

Calculate the price elasticity of demand when price decreases from Ksh. 1.10 to Ksh. 1.00.

Q2=100, Q1=80, p2=1.00, p1=1.10

Answer: -2.33

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