A good’s demand is given by: P = 795 – 2Q. At P = 138, the...

A good’s demand is given by: P = 795 – 2Q. At P = 138, the point price elasticity is: Enter as a value (round to two decimal places if necessary).

Solutions

Expert Solution

Point price elasticity = (P/Q) x (∆Q/∆P)

Demand function =

P = 795 - 2Q

Q = 397.5 - 0.5P

Let price changes by $ 1

Q will change by -0.5 units

Therefore, ∆Q/∆P = -0.5/1

= - 0.5

At P = 138

138 = 795 - 2Q

Q = 328.5

Point Price elasticity at ( 138 , 328.5 ) is

(138/ 328.5) x ( -0.5)

= - 0.021

Therefore, demand is relatively inelastic.

Rahul Sunny answered 1 year ago

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