Question

College logo water bottles priced at $12 sell at a rate of 30 per week, but when the bookstore marks them down to $8, it finds that it can sell 45 water bottles per week. what is the price elasticity of demand for the water bottles?

Answer 1

The price elasticity of demand is 1. You determine price elasticity by dividing the percent change in quantity demanded (there was a 150% change from 30 to 45) by the percent change in price (there was a 150% change from $12 to $8). 150/150=1.