The price elasticity of demand for the portable speaker is inelastic.
Price Elasticity of Demand = ((Q2 - Q1) / ((Q2 + Q1) / 2)) / ((P2 - P1) / ((P2 + P1) / 2))
Price Elasticity of Demand = ((70 - 100) / ((70 + 100) / 2)) / (($18 - $15) / (($18 + $15) / 2))
Price Elasticity of Demand = (-30 / 85) / ($3 / $16.5)
Price Elasticity of Demand = -0.353 / 0.182 = -1.942
Since the price elasticity of demand is greater than 1, the demand for the portable speaker is considered to be inelastic. This means that the percentage change in quantity demanded is less than the percentage change in price. A 20% increase in price led to a 30% decrease in quantity demanded.
A local electronics store recently increased the price of a portable speaker it sells from $15
to $18
. The owner of the store noticed that the store went from selling 100 units a month to 70 speakers a month. Which of the following choices correctly describes the price elasticity of demand for the portable speaker?
1 answer
1 answer