Suppose the inverse demand function is given by ?=5?−5p=5q−5 where p is the market price and...

Suppose the inverse demand function is given by ?=5?−5p=5q−5 where p is the market price and q is the quantity demanded. Calculate price elasticity of demand. Round your answer to the first decimal place. There is no value for p.

This is all the information the question gives.

Solutions

Expert Solution

•P=5Q-5

•Price elasticity of demand= (P/Q)*(∆Q/∆P)

P= 5Q-5

P+5 = 5Q

Q= (P+5)/5

•∆Q/∆P= 1/5

• Since the value of (P/Q) is not given we can assume that it is constant say 1

So, elasticity of demand= 1× 1/5 = 0.2

Rahul Sunny answered 1 year ago

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