Angeline, a bright college student finds out that the iPhone 8 was just launched this past...

Angeline, a bright college student finds out that the iPhone 8 was just launched this past week in Cupertino, CA. She along with the thousands of consumers plans on purchasing the iPhone 8 from Best Buy due to a price decrease from $899.99 to $649.99. Apple expects to see the quantity demanded for iPhone 8 to rise from 2 million to 3 million by the end of the year. What is the iPhone 8’s elasticity of demand?

Expert Solution

Point elasticity

Price elasticity of demand (PED)= % change in quantity demanded /% change in price of the good.

% change in quantity demanded = ((New quantity-old quantity)/old quantity)) x 100

Old quantity 2 million Old price $ 899.99

New quantity 3 million New price $ 649.99

% change in quantity demanded= ((3-2)/2)) x100

=( 1/2) x100

= 50%

% change in price = ((New price-old price)/old price)) x 100

=((649.99-899.99) /899.99) x100

= (-250/899.99) x 100

= -27.78%

Price elasticity of demand = 50%/-27.78%=-1.80

The sign does not matter, PED is always stated without the sign. It is elastic since Ped is >1

Rahul Sunny answered 1 year ago

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