Question

The Acme Company produces and sells widgets. They currently charge $48 per widget, and they sell 452 widgets per week. If the price is increased to $54.58 per widget, then 62 fewer widgets per week can be sold. Assuming that demand is linear, find the value for elasticity of demand at the current price. Round as necessary.

Answer 1

1

Step-by-step explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

percentage change in quantity demanded = (452 - 62 / 452) - 1 = -0.137

percentage change in price = (54.58 / 48) - 1 = 0.137

=-0.137 / 0.137 = -1

-1 in absolute terms = 1