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A discount store has a special offer on CDs. It reduces their price from Rs. 150 to Rs. 100. Suppose the store manager observes that the quantity demanded increases from 700 CDs to 1,300 CDs. What is the price elasticity of demand for CDs?(use arc elasticity)
- a).8
- b)1.0
- c)1.25
- d)1.50
Correct answer is option 'D'. Can you explain this answer?
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A discount store has a special offer on CDs. It reduces their price fr...
To calculate the price elasticity of demand using the arc elasticity formula, we need to follow these steps:
Step 1: Calculate the percentage change in quantity demanded.
Percentage change in quantity demanded = ((New quantity demanded - Old quantity demanded) / ((New quantity demanded + Old quantity demanded) / 2)) * 100
Given that the old quantity demanded is 700 CDs and the new quantity demanded is 1,300 CDs:
Percentage change in quantity demanded = ((1,300 - 700) / ((1,300 + 700) / 2)) * 100
Percentage change in quantity demanded = (600 / 1,000) * 100
Percentage change in quantity demanded = 60%
Step 2: Calculate the percentage change in price.
Percentage change in price = ((New price - Old price) / ((New price + Old price) / 2)) * 100
Given that the old price is Rs. 150 and the new price is Rs. 100:
Percentage change in price = ((100 - 150) / ((100 + 150) / 2)) * 100
Percentage change in price = (-50 / 125) * 100
Percentage change in price = -40%
Step 3: Calculate the price elasticity of demand.
Price elasticity of demand = (Percentage change in quantity demanded) / (Percentage change in price)
Price elasticity of demand = 60% / -40%
Price elasticity of demand = -1.5
Since price elasticity of demand is negative, we take the absolute value to get a positive elasticity value.
Price elasticity of demand = |-1.5| = 1.5
Therefore, the price elasticity of demand for CDs is 1.5.
The correct answer is option D) 1.50.
Step 1: Calculate the percentage change in quantity demanded.
Percentage change in quantity demanded = ((New quantity demanded - Old quantity demanded) / ((New quantity demanded + Old quantity demanded) / 2)) * 100
Given that the old quantity demanded is 700 CDs and the new quantity demanded is 1,300 CDs:
Percentage change in quantity demanded = ((1,300 - 700) / ((1,300 + 700) / 2)) * 100
Percentage change in quantity demanded = (600 / 1,000) * 100
Percentage change in quantity demanded = 60%
Step 2: Calculate the percentage change in price.
Percentage change in price = ((New price - Old price) / ((New price + Old price) / 2)) * 100
Given that the old price is Rs. 150 and the new price is Rs. 100:
Percentage change in price = ((100 - 150) / ((100 + 150) / 2)) * 100
Percentage change in price = (-50 / 125) * 100
Percentage change in price = -40%
Step 3: Calculate the price elasticity of demand.
Price elasticity of demand = (Percentage change in quantity demanded) / (Percentage change in price)
Price elasticity of demand = 60% / -40%
Price elasticity of demand = -1.5
Since price elasticity of demand is negative, we take the absolute value to get a positive elasticity value.
Price elasticity of demand = |-1.5| = 1.5
Therefore, the price elasticity of demand for CDs is 1.5.
The correct answer is option D) 1.50.
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A discount store has a special offer on CDs. It reduces their price fr...
Buddy you can do this directly by the elasticity formula
change in quantity / change in price = 600/50×150/700=1.50 is the answer
change in quantity / change in price = 600/50×150/700=1.50 is the answer
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A discount store has a special offer on CDs. It reduces their price from Rs. 150 to Rs. 100. Suppose the store manager observes that the quantity demanded increases from 700 CDs to 1,300 CDs. What is the price elasticity of demand for CDs?(use arc elasticity)a).8b)1.0c)1.25d)1.50Correct answer is option 'D'. Can you explain this answer?
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A discount store has a special offer on CDs. It reduces their price from Rs. 150 to Rs. 100. Suppose the store manager observes that the quantity demanded increases from 700 CDs to 1,300 CDs. What is the price elasticity of demand for CDs?(use arc elasticity)a).8b)1.0c)1.25d)1.50Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A discount store has a special offer on CDs. It reduces their price from Rs. 150 to Rs. 100. Suppose the store manager observes that the quantity demanded increases from 700 CDs to 1,300 CDs. What is the price elasticity of demand for CDs?(use arc elasticity)a).8b)1.0c)1.25d)1.50Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A discount store has a special offer on CDs. It reduces their price from Rs. 150 to Rs. 100. Suppose the store manager observes that the quantity demanded increases from 700 CDs to 1,300 CDs. What is the price elasticity of demand for CDs?(use arc elasticity)a).8b)1.0c)1.25d)1.50Correct answer is option 'D'. Can you explain this answer?.
A discount store has a special offer on CDs. It reduces their price from Rs. 150 to Rs. 100. Suppose the store manager observes that the quantity demanded increases from 700 CDs to 1,300 CDs. What is the price elasticity of demand for CDs?(use arc elasticity)a).8b)1.0c)1.25d)1.50Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A discount store has a special offer on CDs. It reduces their price from Rs. 150 to Rs. 100. Suppose the store manager observes that the quantity demanded increases from 700 CDs to 1,300 CDs. What is the price elasticity of demand for CDs?(use arc elasticity)a).8b)1.0c)1.25d)1.50Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A discount store has a special offer on CDs. It reduces their price from Rs. 150 to Rs. 100. Suppose the store manager observes that the quantity demanded increases from 700 CDs to 1,300 CDs. What is the price elasticity of demand for CDs?(use arc elasticity)a).8b)1.0c)1.25d)1.50Correct answer is option 'D'. Can you explain this answer?.
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