Question

Study the following diagram and answer the questions:

Questions:

1. Calculate the price elasticity of demand using the ratio method.
2. Find out the type of price elasticity of demand.

Answer 1

1. ${\displaystyle {\text{E}}_{\text{d}}=\frac{\Delta \text{Q}}{\text{Q}}\times \frac{\text{P}}{\Delta \text{P}}}$
   ∴ ${\displaystyle {\text{E}}_{\text{d}}=\frac{60}{110}\times \frac{65}{15}}$
   ∴ ${\displaystyle {\text{E}}_{\text{d}}=\frac{4}{22}\times \frac{13}{1}}$
   ∴ ${\displaystyle {\text{E}}_{\text{d}}=\frac{52}{22}=2.36}$
2. The type of price elasticity of demand is relatively elastic. (E_d > 1)