When the price of a sweet roll is $2, the bakery sells 300 rolls per week.If it raises the price to $3, then it sells 150 rolls per week.Based on this, the price elasticity of a sweet roll between these prices is
A)0.40.
B)1
C)1.67.
D)0.67.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the quantity demanded decreases from 300 to 150 (a decrease of 150), and the price increases from $2 to $3 (an increase of $1). The percentage change in quantity demanded is -150/300 = -0.5 (or -50%), and the percentage change in price is 1/2 = 0.5 (or 50%). The price elasticity of demand is thus -0.5 / 0.5 = -1, and the absolute value is taken for elasticity, making it 1. My previous calculation was incorrect; the correct answer is indeed 1, reflecting a unitary elasticity.

When the Price of a Sweet Roll Is $2, the Bakery