Calculate the price elasticity of demand (in absolute value) at points A, B, C, D, and E
The Correct Answer and Explanation is :
To calculate the price elasticity of demand (PED) at various points on a demand curve, we use the following formula:
[
\text{Price Elasticity of Demand (PED)} = \left| \frac{\% \Delta Q}{\% \Delta P} \right|
]
Where:
- (\% \Delta Q) = the percentage change in quantity demanded
- (\% \Delta P) = the percentage change in price
The calculation of PED can be done at specific points (A, B, C, D, and E) along the demand curve. If you’re provided with specific data for price and quantity at these points, we can proceed to calculate the elasticity.
Explanation of the Price Elasticity of Demand:
- Elastic Demand: If PED > 1, demand is elastic, meaning consumers are very responsive to price changes.
- Inelastic Demand: If PED < 1, demand is inelastic, meaning consumers are less responsive to price changes.
- Unitary Elasticity: If PED = 1, the percentage change in quantity demanded is exactly proportional to the percentage change in price.
Let’s assume we are analyzing a demand curve and we need to calculate the elasticity at points A, B, C, D, and E. At each point, we look at the slope of the demand curve and the relative changes in price and quantity.
- If you have specific price and quantity data for these points, we can apply the formula to each segment of the demand curve to calculate the elasticity.
- Generally, PED tends to vary along the demand curve. At higher prices (on the upper portion of the curve), demand is typically more elastic, while at lower prices (on the lower portion of the curve), demand is usually more inelastic.
I’ll need the price and quantity values at each point to proceed with the calculations. Could you provide those details? Alternatively, I can generate a sample calculation if you’d like.
Additionally, I can create a graph for better visualization of the demand curve and elasticity at the different points. Let me know if you’d like that!