Price of a product increased from $10 to $14. The quantity demanded decreased from 88 to 80 unit
Coefficient of price elasticity of demand= % change in quantity demanded/% change in price
Percentage change= (new value – old value)/old value
Using the formulas above:
Calculate the price elasticity of demand
Is the product elastic or inelastic?
What could this product be? give an example
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The percentage change in price is [(14 - 10)/10] = 40% increase.
The percentage change in quantity demanded is [(80 - 88)/88] = -9.09% decrease.
Using the formula for price elasticity of demand:
Price elasticity of demand = (-9.09% decrease) / (40% increase)
Price elasticity of demand = -0.2273
A price elasticity of demand less than 1 is considered inelastic. Therefore, the product in this example is inelastic.
An example of a product that could exhibit this price elasticity of demand could be a necessity such as bread. Even if the price goes up, consumers may still continue to purchase it, albeit in slightly smaller quantities, because bread is a staple food item.
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