Question

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

Answer 1

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]