Price elasticity of demand
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Suppose the price of apples rises from $3 a pound to $3.45 and your consumption of apples drops from 30 pounds of apples a month to 21 pounds of apples. Calculate your price elasticity of demand of apples. What can you say about your price elasticity of demand of apples? Is it elastic, inelastic, or unitary elastic?
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The solution calculates the Price elasticity of demand of apples.
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Price elasticity of demand is the magnitude of proportionate change in quantity demanded/ Proportionate change in price
Mathematically the arc price elasticity of demand is defined as
{ change in Q /(Q2+Q1)/2} / {change in P ...
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