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=

Expert Answers
crmhaske eNotes educator| Certified Educator

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:


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


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


`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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oldnick | Student

`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`