1. avatar says

    Good Day John,

    Hope all is well. Glad to be back with you.


    I am doing Example 3 in Chapter 7 (Price Elasticity of Demand) and I am a bit confused.

    The PED is = % change in demand / % change in price

    Therefore to answer the example my formula should read:

    ((D2- D1)/D1))*100 ((200-100)/100))*100 = 100
    ————————– ——————————– ——- = 30.12
    ((P2- P1)/P1))*100 ((16 – 15.5)/15.5))*100 = 3.32

    Am I correct?

  2. Profile photo of Thanana says

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  3. Profile photo of John Moffat says

    If we start from 16 and demand of 100, then changing to 15.5 means that demand goes up from 100 to 200 – a percentage change of (200-100)/100 = 100%

    Price goes from 16 to 15.5 which is a percentage change if (16 – 15.5)/15 = 3.33%

    The formulae you wrote were wrong. It should be P2 – P1 / P1; and D2 – D1 / D1

  4. avatar says

    hello sir, i am a bit confused with example 3 i used the formula
    % change in price=(P1-P2)/P2*100
    % change in demand=(Q2-Q1)/Q2*100

    when i am applying this formula to the question example 3 i am getting the answer as 16 for the first one and 7.25 for the second one. And behind the book its different answers which do not match mine. i am very confused sir please reply :(

    • Profile photo of John Moffat says

      I am not sure what to answer, because the solution at the back of the notes shows the workings.

      You do not say how you managed to arrive at 16 and 7.25.

      If you say how your workings were different from the answer then I will try and explain where you have gone wrong.

      • avatar says

        P1 is 16 P2 15.5 Q1 100 Q2 200

        QD%= (200-100)/200*100=50%
        PRICE%= (16-15.5)/15.5*100=3.225%

        So the formula applies as PED=%QD / %PRICE
        50/3.225= 16.

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