Explore BrainMass

Explore BrainMass

    Applied Math on determining price elasticity of demand

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The marketing team for a restaurant wants to determine the price elasticity of demand coefficient for its steak dinner.
    It priced its dinner at different price points in local restaurants to see how many would be sold at different prices. The following is the result of the price trials:

    Price Quantity
    $15 1000
    $10 2000

    The formula for calculating the coefficient of the price elasticity of demand is:
    Percent change in qty / percent change in price (midpoint formula).
    Remember to use your rules of algebra when calculating this problem.
    Calculations in parentheses first.
    Divisions and multiplication next
    Addition and substraction last.

    [(Q Demand (new) - Q Demand (old)]/ [Q Demand (old) +Q Demand (new)]*2
    [Price (new) - Price (old)]/ [Price (old) +Price (new)]*2

    What is the coefficient?
    Does this indicate that the meals are price elastic or inelastic?

    © BrainMass Inc. brainmass.com October 10, 2019, 2:29 am ad1c9bdddf

    Solution Preview

    Price-elasticity of demand = [2(q2 - q1)/(q2 + q1)] /[2(p2 - p1)/(p2 + p1)] ...

    Solution Summary

    A Complete, Neat and Step-by-step Solution is provided.