The price of a good is initially $4, and the quantity demanded is 30. When the price increases to $6, the quantity demanded decreases to 20. What is the price elasticity of demand between these two prices?
A) 1
B) 0.67
C) 0.4
D) 10

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: [(Q2 - Q1) / (Q2 + Q1) / 2] / [(P2 - P1) / (P2 + P1) / 2], where Q1 and Q2 are the initial and final quantities demanded, and P1 and P2 are the initial and final prices. Substituting the given values: [(20 - 30) / (20 + 30) / 2] / [(6 - 4) / (6 + 4) / 2] = (-10 / 25) / (2 / 5) = -0.4 / 0.4 = -1. The absolute value is taken for elasticity, so it is 1.

The Price of a Good Is Initially $4, and the Quantity