Question

compute and show the solution

1. Given that the price of Coke is Php. 10.00 and its corresponding quantity demanded is 50. Compute for the price elasticity of demand if price increased to 11.75 and quantity demanded decreased to 47. Show your complete solution in a piece of paper, BOX your final answer (in two decimal places), indicate the degree of elasticity and attach a photo of your solution using the attach button (Don't forget to write your name on the paper with your solution and answer).

2.

Given the following:

P1 = 10

P2 = 11.75

Q1 = 50

Q2 = 47

Compute for the elasticity using the mid-point formula. Show your complete solution in a piece of paper, BOX your final answer (in two decimal places), indicate the degree of elasticity and attach a photo of your solution using the attach button (Don't forget to write your name on the paper with your solution and answer).

3. At the early stage of the pandemic, price of face mask is 150 pesos, quantity demanded is 2,500. Now the price of face mask is down to 15 pesos, quantity demanded is 10,000. Compute for the elasticity using the mid-point formula. Show your complete solution in a piece of paper, BOX your final answer (in two decimal places), indicate the degree of elasticity and attach a photo of your solution using the attach button (Don't forget to write your name on the paper with your solution and answer).

Answer 1

Answer (1) P1 = 10 , P2 = 11.75 ; Q1 = 50 , Q2 = 47

% change in price = change in price ÷ P1 × 100

= 11.75 - 10 ÷ 10 × 100 = 1.75 ÷ 10 × 100 = 17.5 %

% change in quantity = change in quantity ÷ Q1 × 100

= ( 47 - 50 ) ÷ 50 × 100 = -3 ÷ 50 × 100 = - 6%

Price elasticity of demand = - (% change in quantity ÷ % change in price ) = - ( -6% ÷ 17.5% ) = 0.34

Hence Price elasticity of demand is 0.34 that is inelastic because E_{​​​​​​D} < 1 i.e ( 0.34 ).

Answer (2) Using mid point method

P1 = 10 , P2 = 11.75 ; Q1 = 50 , Q2 = 47

% change in price = (P2 - P1) ÷ (P1 + P2)/2 × 100

= (11.75 - 10) ÷ ( 11.75 + 10 ) / 2 × 100 = 1.75 / 10.875 × 100 = 16.09%

% change in quantity = ( Q2 - Q1 ) ÷ ( Q1 + Q2 ) / 2 × 100 = ( 47 - 50 ) ÷ ( 47+50) / 2 × 100 = -3÷ 48.5 × 100 = 6.19%

Price elasticity of demand = % change in quantity / % change in price = 6.19% / 16.09% = 0.38

Price elasticity of demand is 0.38 that is inelastic as it is smaller than 1.

Answer (3) P1 = 150 , P2 = 15 ; Q1 = 2500 , Q2 = 10,000

Price elasticity of demand using mid point method

% change in quantity = (Q2-Q1) ÷ (Q1+Q2)/2 × 100 = (10,000 - 2,500) ÷ ( 2500 + 10,000)/2 × 100

= 7500 ÷ 6250 × 100 = 120%

% change in price = ( P2 - P1 ) ÷ (P1 + P2)/2 × 100

= (15-150) ÷ (150+15)/2 × 100 = - 135 / 82.5 × 100 = -163.63%

Price elasticity of demand = - (% change in quantity / % change in price) = - (120% / - 163.63%) = 0.73

Price elasticity of demand is 0.73 which is less than 1 hence elasticity of demand is inelastic.

* Kindly ignore - sign while calculating price elasticity of demand , as it become positive as formula consists of (-) sign. - × - = +

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