Question
In: Economics
In a local market, the monthly price of Internet access service decreases from $3535 to $2525,...
In a local market, the monthly price of Internet access service decreases from
$3535
to
$2525,
and the total quantity of monthly accounts across all Internet access providers increases from
80 comma 00080,000
to
180 comma 000180,000.
What is the value price elasticity of demand, expressed as a positive number?
is it 3.75?
. (Round your answer to two decimal places.)
The demand is
Solutions
Expert Solution
P1 = 3535 Q1 = 80,000
P2 = 2525 Q2 = 180,000
Price elasticity of demand = (Q2 - Q1) / (P2 - P1) * (P1 + P2) / (Q1 + Q2)
= (180,000 - 80,000) / (2525 - 3535) * (3535 + 2525) / (80,000 + 180,000)
= (100,000 / -1,010) * (6,060 / 260,000)
= -606,000,000 / 262,600,000
= -2.31
The absolute value of price elastisity of demand is 2.31.
The demand is elastic. [Because PED is greater than 1]
Rahul Sunny answered 7 months agoRelated Solutions
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