Help with Elasticity of Demand

Readers Question: How would I the price elasticity of demand if the mean price is $7.50 and the mean quantity is 20,000? I don’t even know where to begin. My text book does not offer a proper equation for a problem with missing numbers.

Yes, to calculate elasticity of demand you would need to know the change in price and change in quantity.

There are different ways of calculating the % change in price and demand. It can be either arc elasticity of demand (taking mid point) or point elasticity

Prices Elasticity of demand calculates how responsive demand is to a change in price. With the two figures above, you cannot calculate elasticity. You would need to know two points on the demand curve.

One thought on “Help with Elasticity of Demand

  1. The manager of a sporting goods store uses cost-plus pricing to determine the profit-maximizing price of bicycles. The cost of a bicycle to the store is RM80. The manager estimates that the PED is -3. What is the price of the bicycle that the manager must charged to the customer?

Leave a Reply

Your e-mail address will not be published. Required fields are marked *