Table 5.3 shows the quantity supplied and the quantity demanded for restaurant meals at different prices. Use the information in the table below to calculate the value of the price elasticity of demand for restaurant meals. Table 5.3

A)−1/2
B)−5/3
C)−3/5
D)−3/7
E)−7/3

Question

Table 5.3 shows the quantity supplied and the quantity demanded for restaurant meals at different prices. Use the information in the table below to calculate the value of the price elasticity of demand for restaurant meals.​ Table 5.3
​

A)−1/2 
B)−5/3 
C)−3/5 
D)−3/7 
E)−7/3

Quizplus · Accepted Answer

To calculate the price elasticity of demand, we use the formula: 
% change in quantity demanded / % change in price

Let's look at the table:

| Price | Quantity Supplied | Quantity Demanded |
|-------|------------------|--------------------|
| 8     | 130              | 30                |
| 9     | 140              | 50                |
| 10    | 150              | 70                |
| 11    | 160              | 90                |
| 12    | 170              | 110              |
| 13    | 180              | 130              |

To calculate the % change in quantity demanded, we use the formula: 
(change in quantity demanded / average quantity demanded) * 100

Let's use the example of a change in price from $11 to $10: 
The change in quantity demanded is 70 - 90 = -20 
The average quantity demanded is (70 + 90) / 2 = 80 
So the % change in quantity demanded is: 
(-20 / 80) * 100 = -25%

To calculate the % change in price, we use the formula: 
(change in price / average price) * 100

Using the same example: 
The change in price is $10 - $11 = -$1 
The average price is ($10 + $11) / 2 = $10.50 
So the % change in price is: 
(-1 / 10.50) * 100 = -9.52%

Now we can calculate the price elasticity of demand:

% change in quantity demanded / % change in price 
= -25% / -9.52% 
= 2.625

But we want the value to be negative, since quantity demanded falls as price increases. So the answer is:

Price elasticity of demand = -2.625

Simplifying, we get -3/7. So the correct answer is D: -3/7.

Table 53 Shows the Quantity Supplied and the Quantity Demanded for for Restaurant