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Block's sells 500 bottles of perfume a month when the price is $7
Block's sells 500 bottles of perfume a month when the price is $7. A huge increase in resource
costs cause the price to rise to $9 and Block only manages to sell 460 bottles of perfume. The
price elasticity of demand is:
- .33 and elastic
- 3.0 and elastic
- .33 and inelastic
- 3.0 and inelastic
Expert Solution
Change in quantity= (500- 460)/ (500+ 460)
= 40/ 960
= 0.0417
Change in price= (7- 9)/ (7+ 9)
= -2/ 16
= -0.125
Price elasticity of demand= 0.0417/ -0.125
= -0.33
So,
The price elasticity of demand is 0.33 inelastic.
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