The demand curve for a product is Q = 50

Question

The demand curve for a product is Q = 50 - 0.5P. What is the price elasticity of demand at a price of $60?
A) -1.50
B) -1.0
C) -0.80
D) -0.25

Quizplus · Accepted Answer

The price elasticity of demand (PED) formula is PED = (% change in quantity demanded) / (% change in price). To find the PED at P = $60, first calculate the quantity demanded (Q) using the demand equation Q = 50 - 0.5P. Substituting P = 60 gives Q = 50 - 0.5(60) = 50 - 30 = 20. To find the PED, we need the derivative of Q with respect to P, which is -0.5. The PED formula can also be expressed as (dQ/dP) * (P/Q). Substituting the values gives (-0.5) * (60/20) = -1.5.