# Economics - Microeconomics

1. A major cereal manufacturer decides to lower prices from $3.60 to $3.00 per 15-ounce box. If quantity demanded increases by 18%,

what is the price elasticity of demand?

We need percentages change in quantity and the percentage and the percentage change in price.

Need to use the average of the two end values to calculate percentage change.

P2 - P1

____________ x 100 = Percentage change in price

1/2(P1 + P2)

3.00 - 3,60

____________ = - 0.6/ 3.3 = 18 percent change in price

1/2(3.60 + 3.00)

Q2 - Q1_______ x 100 = Percentage change in price

1/2(Q1 - Q2)

I am trying to figure out what q2 is?

How do figure this out by mathematical equation and by graph

I know q1 = 18%

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#### Solution Preview

(1) Price elasticity of demand = Percentage change in quantity / Percentage change in price

= 18 / [(p2 - ...

#### Solution Summary

The expert examines the microeconomics for Major Cereal Manufacturers. A complete, neat and step-by-step solution is provided.