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Elasticity of demand

This topic has 1 reply, 2 voices, and was last updated 8 years ago by Ken Garrett.

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February 27, 2017 at 7:38 pm #374632
anette25
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The price of product of BG is $2 per unit and annual demand is 1000.market research indicates that an increase in price of 40 cent per unit will result in fall in annual demand for the good of 60.what is elasticity of demand at the current price at $2.( here we assume the demand curve is straight line).
February 27, 2017 at 8:12 pm #374640
Ken Garrett
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So price goes from 2 to 2.40 and demand from 1000 to 940
Proportional change in demand = 60/1000 = 0.06
Proportional change in price = 0.4/2 = 0.2
Elasticity of demand = 0.06/0.2 = 0.3
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