\"The market price for Cork Oak sapling trees recently rose from $8 to $10 apiec
ID: 1214981 • Letter: #
Question
"The market price for Cork Oak sapling trees recently rose from $8 to $10 apiece. If revenues rose by 10% as a result, what is the original price elasticity of Cork Oak saplings? Assume demand is linear"
I have been stuck on this elasticity problem for a while now, I understand the original formulas as the percentage change in quantitiy/percentage change in price, and the several different ways to write out that equation. I do not know how to relate percentage change in revenue to price or quantity in the formula.
Explanation / Answer
% change in price= (8-10)/8*100=25%
TR=p*q
10=25*q
q=0.4
=40%
Ed=percentage change in quantitiy/percentage change in price
=-40/25
=-1.6
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