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. `"E"_"d" = (Delta"Q")/"Q" xx "P"/(Delta"P")`
   ∴ `"E"_"d" = 60/110 xx 65/15`
   ∴ `"E"_"d" = 4/22 xx 13/1`
   ∴ `"E"_"d" = 52/22 = 2.36`
2. The type of price elasticity of demand is relatively elastic. (E_d > 1)