Feelgood pharmaceuticals has developed a new treatment for asthma. The tablets a
ID: 1203815 • Letter: F
Question
Feelgood pharmaceuticals has developed a new treatment for asthma. The tablets are sold individually. You study survey data and observe that if the tablet cost $5, then 100 tablets are demanded. You also observe that if the tablet cost$3, then 150 tablets are demanded. Can the price elasticity of demand be calculated? If so, calculate the PED. Is the PED elastic or inelastic. Feelgood pharmaceuticals has developed a new treatment for asthma. The tablets are sold individually. You study survey data and observe that if the tablet cost $5, then 100 tablets are demanded. You also observe that if the tablet cost$3, then 150 tablets are demanded. Can the price elasticity of demand be calculated? If so, calculate the PED. Is the PED elastic or inelastic.Explanation / Answer
Yes, the price elasticity of demand can be calculated.
PED = % change in Quantity demanded/%change in Price
PED = [Q2 - Q1]/[P2 - P1]*P1/Q1
Here Q1 = 100 , Q2 = 150 , P1 = 5 and P2 = 3
So, PED = [100 - 150]/[5 - 3]*5/100
= (-50/2)(5/100)
= -5/4
= -1.25
PED is elastic as % change in quantity demanded is more then % change in price..
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