Question

When the price of oranges increases from $4 to $6 per bag, the quantity demanded of oranges decreases from 800 bags to 700 bags. The price elasticity of demand over this price range is equal to___________

Answer 1

0.25

Step-by-step explanation:

`Percentage\ increase\ in\ price=(6-4)/(4)*100`

= 50%

`Percentage\ Decrease\ in\ quantity\ demanded=(800-700)/(800)*100`

= 12.5%

Therefore,

`price\ elasticity\ of\ demand=(Percentage\ change\ in\ quantity\ demanded)/(percentage\ change\ in\ price)`

`price\ elasticity\ of\ demand=(12.5)/(50)`

= 0.25

Hence, the price elasticity of demand over this price range is equal to 0.25