Question

When the price rises from ​$1 to ​$2 a​ DVD, what is the price elasticity of​ demand? nothing ​(Use the point elasticity formula at the initial price of ​$1. Enter your response as a decimal rounded to two​ places.)

Answer 1

To calculate the price elasticity of demand for DVDs as the price rises from $1 to $2, the percentage change in quantity demanded needs to be known. Without this, we cannot compute the elasticity using the point elasticity formula. The elasticity is calculated as the percentage change in quantity demanded divided by the percentage change in price.

Step-by-step explanation:

To calculate the price elasticity of demand when the price of a DVD rises from $1 to $2, we need to use the point elasticity formula along with information about the percentage change in quantity demanded. Unfortunately, the provided information does not include the change in quantity demanded, which is essential for calculating price elasticity. As a result, we cannot provide a numerical answer without this information.

However, generally, the percentage change in quantity demanded is determined by the formula: [(change in quantity) / (original quantity)] × 100. Once we have this percentage, we can divide it by the percentage change in price to find the elasticity. For example, if the quantity demanded decreased by 20% when the price increased from $1 to $2 (which is a 100% increase in price), the elasticity of demand would be -0.2 / 1, which equals -0.20 (since the demand for DVDs is likely to decrease when the price doubles). Remember, if the absolute value of the elasticity is greater than 1, demand is considered elastic; if it is less than 1, demand is inelastic; and if it is exactly 1, it is unit elastic.

Answer 2

Answer: 0.33 (to 2 decimal places)

Explanation:

Old Price =1

New Price =2

1st QDemand =150

2nd QDemand =100

Calculating the Change in Quantity Demanded

[1st QDemand - 2nd QDemand] / 2nd QDemand

[100 - 150] / 150 = (-50/150) = -1/3 = -0.3 recurring.

Calculating the Change in Price [New Price - Old Price] / Old Price

[2 - 1] / 1 = (1/1) = 1

PEoD = (% Change in Quantity Demanded)/(% Change in Price)

PEoD = -0.333/1 = -0.333 (2dp)

Ignore the negative sign when calculating price elasticity, becasue PEoD, Price Elasticity of Demand is always positive.

As PEoD = +0.33 (2dp) is less than 1, Demand is therefore Price Inelastic.

(Since Demand is not sensitive to changes in price)