Economics/Help Please!!!?

Question

Can someone please help me with this questions:

How can find the price elasticity of demand between
1.P=$25 and P=$20
2.P=$20 and P=$15

This is the only information I got:
Price Quantity demanded
$25 20
$20 40
$15 60
$10 80
$5 100

PLEASE HELP I JUST CANT UNDERSTAND IT.
THANKS FOR EVERYONE WHO HELPED.

Answer 1

Price elasticity occurs when demand changes with price.

Let's think about that for a moment. If you would buy a box of spaghetti for $1.00, would you buy it for $1.10? How about for $5? How about $10?

As you can see, as the price goes up, you'll want less. You can also substitute. Instead of spaghetti, you'll have linguine, or fettuccine. Or, you'll go without.

Now, how much would you pay for a cure for cancer, if your mom had cancer? $10,000? $100,000? It really doesn't matter, since you'd want to save her (hopefully.) Demand for this product is inelastic.

Let's say that 10 people want spaghetti at $1 a box, but when it goes to 50 cents a box, 20 people want it. Price changed by 50%, quantity demanded increased by 100%. 100% / 50% = 2
Even though it went down (-50%), you should use absolute values when calculating elasticity.


So, this is elastic. Anything over 1 is considered elastic.

Now, let's see your problems.

1. P=$25 and P=$20.

At $25, 20 items are demanded
At $20, 40 items are demanded.

So, quantity went up by 100% when price fell by 20%.

Elasticity = (change in quantity %) / (change in price %)

= 100% / 20% = 5 (Elastic)

Second problem we'll work the same way.

P=$20, and 40 goods are desired
P=$15 and 60 goods are desired.

Demand is up 50%, and price is down 25%.

50% / 25% = 2 (Elastic)

Good luck!

Mysstere