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3 May, 15:26

Suppose that when the price of a good is $15, the quantity demanded is 40 units, and when the price falls to $6, the quantity increases to 60 units. The price elasticity of demand near a price of $6 and a quantity of 60 can be calculated as:

A.-5/6

B.-2

C.-2/9

D.-9/2

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Answers (1)
  1. 3 May, 17:07
    0
    (A) - 5/6

    Explanation:

    Price elasticity of demand = % change in quantity demanded : % change in price

    % change in quantity demanded = (60-40) / 40 * 100 = 20/40 * 100 = 50%

    % change in price = ($6-$15) / $15 * 100 = - $9/$15 * 100 = - 60%

    Price elasticity of demand = 50% : - 60% = - 5/6
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