My point is the formula used to calculate elasticity. The example that sticks ou
ID: 1137983 • Letter: M
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My point is the formula used to calculate elasticity. The example that sticks out is * is the price of beef falls 1% and the quantity demanded rises by 2% then the price elasticity demand for beef has a value of -2 ” I do not understand where the -2 comes from or how it is calculated? My point is the formula used to calculate elasticity. The example that sticks out is * is the price of beef falls 1% and the quantity demanded rises by 2% then the price elasticity demand for beef has a value of -2 ” I do not understand where the -2 comes from or how it is calculated? I do not understand where the -2 comes from or how it is calculated?Explanation / Answer
The formula to calculate the elasticity is "%change in the quantity / % change in the price"
Here, the percentage change in the quantity is 2% when the price decrease by 1%. A decrease in the price will be shown as a negative sign in front of the percentage. So we will write it as,
ed = 2% / -1%
the elasticity of demand will be -2.
That means any change in the price of the beef will affect the demand for beef twice the amount. Like if the price decreased by 10% the demand will increase by 20%, similarly, if the price increased by 10% the demand will decrease by 20%. or we write it as -20%.
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