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find the elasticity of demand at the price p=2.5 with the demand of p.x=72.5 the...

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rmunoz90 | Student, Undergraduate | Salutatorian

Posted May 10, 2013 at 3:27 PM via web

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find the elasticity of demand at the price p=2.5 with the demand of p.x=72.5

the elasticity of demand is ED=

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oldnick | Valedictorian

Posted May 10, 2013 at 11:59 PM (Answer #3)

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`p xx x=72.5`    `x=72.5/p`  `dx/(dp)= -72.5/p^2`   

`E_d= (dx/(dp))(p/x)= -72.5 /p^2 xx p^2/72.5=-1` 

Anelastyc 

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crmhaske | College Teacher | (Level 3) Associate Educator

Posted May 10, 2013 at 5:03 PM (Answer #1)

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First, calculate the demand function (x)

px = 72.5
x = 72.5/p

In order to calculate the elasticity of demand, use the following equation:

`E_d=dx/(dp)(p/x)`

Next, calculate the derivative `dx/(dp)`  :

`dx/(dp)=d/(dp)(7.5/p)=-7.5/p^2`

Substitute the equations for x and `dx/(dp)`  into the equation for the elasticity of demand, and solve:``

`E_d=(-7.5/p^2)(p/(72.5/p))`

`E_d=-7.5/72.5=-0.103 <1`

The demand in price is inelastic as the elasticity of demand is a value less than 1.

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