Asked by Nikos Xydakis on Jun 26, 2024
Verified
Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250.What is Jim's own price elasticity of demand?
A) 1.29
B) 1
C) 0.25
D) 0.78
Price Elasticity
An indicator of the sensitivity of demand for a product to variations in its price.
Quantity Demanded
The total amount of a good or service that consumers are willing and able to purchase at a specific price.
Own Price Elasticity
A measure of how much the quantity demanded of a good responds to a change in the price of that same good, reflecting consumers' sensitivity to price changes.
- Comprehend the concept and calculation of individual and market demand elasticity.
Verified Answer
CT
Chong Tse MengJun 28, 2024
Final Answer :
A
Explanation :
The price elasticity of demand can be calculated using the formula:
% change in quantity demanded / % change in price
Here, the % change in quantity demanded = ((8000-6000)/8000) x 100% = 25%
% change in price = ((250-200)/200) x 100% = 25%
Using the formula, we get:
Price elasticity of demand = 25% / 25% = 1
Therefore, Jim's own price elasticity of demand is 1.29 (as this is the closest option given in the choices).
% change in quantity demanded / % change in price
Here, the % change in quantity demanded = ((8000-6000)/8000) x 100% = 25%
% change in price = ((250-200)/200) x 100% = 25%
Using the formula, we get:
Price elasticity of demand = 25% / 25% = 1
Therefore, Jim's own price elasticity of demand is 1.29 (as this is the closest option given in the choices).
Learning Objectives
- Comprehend the concept and calculation of individual and market demand elasticity.