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30 November, 08:07

Draw a graph AND calculate the price elasticity of the demand for chocolate bars if the price goes from $2 to $3, causing you to change your weekly consumption from 8 bars per week to 5. Show all work and explain what the outcome means to a business!

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  1. 30 November, 10:50
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    The formula for the price elasticity is given by

    e = [ (Q2 - Q1) / Q1] / [ (P2 - P1) / P1]

    Substituting the given values

    e = [ (5 - 8) / 8] / [ (3 - 2) / 2]

    e = - 0.75

    The demand is inelastic since the elasticity is less than 1. The graph would be a line sloping towards the left.
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