A friend of mine just asked this question and I showed how far we understand. Ca
ID: 1228719 • Letter: A
Question
A friend of mine just asked this question and I showed how far we understand. Can you explain in easy terms how you finish this.Suppose the demand curve for coffee is P= 10 - 2Q and P = $6. Calculate the absolute value of the price elasticity of demand at the $6 price.
A) 6.00
B) 1.50
C) 1.00
D) 0.66
E) 0.16
This is what we got...beside the question are what we dont understand
ED = -(dQ/dP x P/Q) why is there a minus in front of this
P= 10 - 2Q ,
if P= $6 ,
6 = 10 -2Q
Q =2
P/Q = 6/2= 3
and
from
P= 10 - 2Q
Q =1/2(10-P) we get it to here....but do not understand how they did
the next step...ie dQ/Dp = - 1/2. please in easy terms
dQ/dP = -1/2
ED = -(-1/2 x 3) = 3/2 = 1.5
answer : B) 1.50
Explanation / Answer
ED = -(dQ/dP x P/Q)
P= 10 - 2Q ,
if P= $6 ,
6 = 10 -2Q
Q =2
P/Q = 6/2= 3
and
from
P= 10 - 2Q
Q =1/2(10-P)
dQ/dP = 1/2 [d(10)/dP - dP/dP] [d(10)/dP =0 , as 10 is constant ][dP/dP = 1]
dQ=dP = 1/2 [0-1]
dQ/dP = -1/2
ED = -(-1/2 x 3) = 3/2 = 1.5
answer : B) 1.50