For the demand function P = 24 - 6Q, _____. A demand is not elastic at a price o

Question

For the demand function P = 24 - 6Q, _____.

A

demand is not elastic at a price of 16

B

demand is unit-elastic at a price of 12

C.

demand is elastic at a price of 2

D.

elasticity of demand equals one at all points on the function

The correct answer is B, how do you reach that conclusion

For the demand function P = 24 - 6Q, _____.

A

demand is not elastic at a price of 16

B

demand is unit-elastic at a price of 12

C.

demand is elastic at a price of 2

D.

elasticity of demand equals one at all points on the function

The correct answer is B, how do you reach that conclusion

Explanation / Answer

P = 24 - 6Q, therefore

6Q = 24 - P

Q = 4 - (P/6)

Elasticity (Ed) = (dQ/dP) x (P/Q) = - (1/6) x [P / (4 - (P/6))] = - P / (24 - P) = P / (P - 24)

Demand is unit elastic when Ed = -1, therefore

[P / (P - 24)] = -1

P = - (P - 24)

P = 24 - P

2P = 24

P = 12.

So demand is unit elastic when Price = 12

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