Determine the price elasticity of demand for a microwave that experienced a 20% drop in price and a 50% increase in weekly quantity demanded.

Answers

Answer 1

Based on the calculations, the price elasticity of demand for a microwave is equal to 2.5.

What is the price elasticity of demand?

The price elasticity of demand can be defined as a measure of the responsiveness of the quantity demanded by a consumer with respect to a specific change in price of the product, all things being equal (ceteris paribus).

Mathematically, the price elasticity of demand can be calculated by using the following formula;

Price elasticity of demand = (Q₂ - Q₁)/[(Q₂ + Q₁)/2]/(P₂ - P₁)/[(P₂ + P₁)/2]

Price elasticity of demand = Percentage change in quantity demanded)/(Percentage change in price)

Substituting the given parameters into the formula, we have;

Price elasticity of demand = 50/20

Price elasticity of demand = 2.5

In this context, we can reasonably infer and logically deduce that the price elasticity of demand for a microwave is equal to 2.5.

Read more on price elasticity here: https://brainly.com/question/24384825

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