Price Demand and Elasticity question Use the price-demand equation below to dete

Question

Price Demand and Elasticity question

Use the price-demand equation below to determine whether demand is elastic, is inelastic, or has unit elasticity at the indicated values of p. x = f(p)= 1560 - 4p - 0.1p^2 p = 60 p = 80 p = 40 Describe the demand's elasticity for the given price-demand equation at p = 60. Choose the correct answer below. Unit Elastic Elastic Inelastic Describe the demand's elasticity for the given price-demand equation at p = 80. Choose the correct answer below. Inelastic Elastic Unit Elastic Describe the demand's elasticity for the given price-demand equation at p =40. Choose the correct answer below. Unit Elastic Elastic Inelastic

Explanation / Answer

given demand ffunction x=f(p) = 1560 - 4p - 0.1p2

Elasticity of demand is calculated using the following formula:

E = (df/dp)*(p/f)

df/dp = - 4 - 0.2p = -(4+0.2p)

E = -(4+0.2p)*[ p/(1560 - 4p - 0.1p2) ]

= -(4p+0.2p2)/(1560 - 4p - 0.1p2)

for absolute value of E = (4p+0.2p2)/(1560 - 4p - 0.1p2)

A) p=60

E = (240+720)/960 = 960/960 = 1 (unit elastic)

B) p=80

E = (1600/600) = 2.6667 > 1 (elastic)

C) p=40

E = 480/1240 = 0.387 < 1 (inelastic)

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