This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.
ScanSolve AI Answer
Here are the solutions to your questions. 1. Step 1: Identify the initial and final prices and quantities. Initial Price (P_1) = N450 New Price (P_2) = N500 Initial Quantity Demanded (Q_1) = 800 units New Quantity Demanded (Q_2) = 600 units Step 2: Calculate the percentage change in quantity demanded. Percentage change in quantity demanded = (Q_2 - Q_1)/(Q_1) × 100\% = (600 - 800)/(800) × 100\% = (-200)/(800) × 100\% = -0.25 × 100\% = -25\% Step 3: Calculate the percentage change in price. Percentage change in price = (P_2 - P_1)/(P_1) × 100\% = (500 - 450)/(450) × 100\% = (50)/(450) × 100\% = (1)/(9) × 100\% ≈ 11.11\% Step 4: Calculate the price elasticity of demand (PED). PED = Percentage change in quantity demandedPercentage change in price = (-25\%)/(11.11\%) = -2.25 The absolute value of price elasticity of demand is typically reported. The price elasticity of demand is 2.25. 2. Price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a good or service to a change in its price. It indicates how much the quantity demanded changes in percentage terms for a one percent change in price. Send me the next one 📸