You are given a market data that says when the price of a bottle of aspirin is $

Question

You are given a market data that says when the price of a bottle of aspirin is $10, the quantity demanded is 60 bottles. When the price is $8, the quantity demanded is 80 bottles. Can the price of elasticity of demand be calculated for aspirin? If so, calculate the PED. Is the PED elastic or inelastic. You are given a market data that says when the price of a bottle of aspirin is $10, the quantity demanded is 60 bottles. When the price is $8, the quantity demanded is 80 bottles. Can the price of elasticity of demand be calculated for aspirin? If so, calculate the PED. Is the PED elastic or inelastic.

Explanation / Answer

Yes, PED can be calculated in this case.

initial price = $10 , initial quantity = 60

new price = $8 , new quantity = 80

PED = % change in qty demanded / % change in price

= [(80 - 60 )/ 60 ] *100 / [(8-10) / 10 ] * 100 =- (20/60)*100 / ( 2/10)*100 = -1.66

In absolute terms PED >1, that ,means demand is elastic.

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