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Homework answers / question archive / A firm's demand curve is estimated to be Q = 400 - 5P, where Q is quantity and P is the price of the good
A firm's demand curve is estimated to be Q = 400 - 5P, where Q is quantity and P is the price of the good. At P = $15, what is the point elasticity of demand?
Computation of Point Elasticity of Demand:
Q = 400 - 5P
Here,
P = $15
So,
Q = 400 - 5*15 = 400 - 75 = 325
Point Elasticity of Demand = ?Q/?P *( P /Q)
Here,
?Q/?P is the price coefficient = -5
Point Elasticity of Demand = -5 * ($15 / 325)
= -5 * 0.0462
Point Elasticity of Demand = -0.23 (The absolute value is 0.23)
