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The 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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Solution Summary

Is it Elastic, Inelastic, or Unitary Elastic?

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The price elasticity of demand measures the responsiveness of quantity
demanded to a change in price, with all other factors held constant.

Definition:
The price elasticity of demand E(D), is calculated using the following formula:

% change in quantity demanded
E(D) = Absolute value of (----------------------------------)
% change in price

Where:
% change in quantity demanded = 100 * (Q_New - Q_Old) / Q_Old
and
% change ...

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