Feelgood pharmaceuticals has developed a new treatment for asthma. The tablets a

Question

Feelgood pharmaceuticals has developed a new treatment for asthma. The tablets are sold individually. You study survey data and observe that if the tablet cost $5, then 100 tablets are demanded. You also observe that if the tablet cost$3, then 150 tablets are demanded. Can the price elasticity of demand be calculated? If so, calculate the PED. Is the PED elastic or inelastic. Feelgood pharmaceuticals has developed a new treatment for asthma. The tablets are sold individually. You study survey data and observe that if the tablet cost $5, then 100 tablets are demanded. You also observe that if the tablet cost$3, then 150 tablets are demanded. Can the price elasticity of demand be calculated? If so, calculate the PED. Is the PED elastic or inelastic.

Explanation / Answer

Yes, the price elasticity of demand can be calculated.

PED = % change in Quantity demanded/%change in Price

PED = [Q2 - Q1]/[P2 - P1]*P1/Q1

Here Q1 = 100 , Q2 = 150 , P1 = 5 and P2 = 3

So, PED = [100 - 150]/[5 - 3]*5/100

= (-50/2)(5/100)

= -5/4

= -1.25

PED is elastic as % change in quantity demanded is more then % change in price..

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If you don't understand anything , then comment , I will revert back on the same.

And if you liked the answer then please do review the same. Thanks. :)

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