the price elasticity of the demand of good is 1.4. if its market price decreases by 3.2 percent, its…

Question 1

Explanation:

Step1: Recall price - elasticity formula

The formula for price elasticity of demand ($E_d$) is $E_d=\frac{%\text{ change in quantity demanded}}{%\text{ change in price}}$.

Step2: Rearrange the formula to solve for $%\text{ change in quantity demanded}$

We know $E_d = 1.4$ and $%\text{ change in price}=- 3.2%$ (negative because price decreases). So, $%\text{ change in quantity demanded}=E_d\times%\text{ change in price}$. $%\text{ change in quantity demanded}=1.4\times3.2 = 4.48$

Answer:

$4.48$

Question 2

Explanation:

Step1: Calculate the average quantity and average price

The average quantity $Q_{avg}=\frac{Q_1 + Q_2}{2}=\frac{124 + 115}{2}=\frac{239}{2}=119.5$ The average price $P_{avg}=\frac{P_1+P_2}{2}=\frac{59 + 62}{2}=\frac{121}{2}=60.5$

Step2: Calculate the percentage change in quantity and price

$%\text{ change in quantity}=\frac{Q_2 - Q_1}{Q_{avg}}\times100=\frac{115 - 124}{119.5}\times100=\frac{-9}{119.5}\times100\approx - 7.53$ $%\text{ change in price}=\frac{P_2 - P_1}{P_{avg}}\times100=\frac{62 - 59}{60.5}\times100=\frac{3}{60.5}\times100\approx4.96$

Step3: Calculate the arc - elasticity of demand

The arc - elasticity of demand $E_d=\frac{%\text{ change in quantity}}{%\text{ change in price}}=\frac{-7.53}{4.96}\approx - 1.52$

Answer:

$-1.52$

Question 3

Explanation:

Step1: Recall price - elasticity formula

The formula for price elasticity of demand ($E_d$) is $E_d=\frac{%\text{ change in quantity demanded}}{%\text{ change in price}}$.

Step2: Rearrange the formula to solve for $%\text{ change in price}$

We know $E_d = 3.5$ and $%\text{ change in quantity demanded}=4.8%$. So, $%\text{ change in price}=\frac{%\text{ change in quantity demanded}}{E_d}$. $%\text{ change in price}=\frac{4.8}{3.5}\approx1.37$

Answer:

$1.37$