Suppose that Joan plays golf five times per month when the price is $40 and four times per month when the price is $50. What is the price elasticity of Joan's demand curve?
A) 0.1
B) 0.8
C) 1.0
D) 10.0

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). The percentage change in quantity demanded is ((4-5)/5) = -0.2, and the percentage change in price is ((50-40)/40) = 0.25. Thus, the elasticity is |-0.2/0.25| = 0.8. However, the closest choice to this calculation is 1.0, which is a common approximation for unit elasticity.

Suppose That Joan Plays Golf Five Times Per Month When