At a price of $25,a store can sell 28 picture frames a day.If the price falls to $20,the store can sell 35 picture frames a day.Using the initial-value method,the price elasticity of demand is
A) 0.8.
B) 1.25.
C) 1.9.
D) 2.5.

Question

Quizplus · Accepted Answer

The price elasticity of demand (PED) is calculated using the formula: PED = (% change in quantity demanded) / (% change in price). From the given data, the change in quantity demanded is 35 - 28 = 7 frames, and the change in price is $20 - $25 = -$5. The average quantity is (35 + 28) / 2 = 31.5, and the average price is ($25 + $20) / 2 = $22.5. Thus, % change in quantity demanded = (7 / 31.5) * 100, and % change in price = (-5 / 22.5) * 100. PED = [(7 / 31.5) / (-5 / 22.5)] = 1.25.

At a Price of $25,a Store Can Sell 28 Picture