The demand for watches is Q = 1,000P -2.50 I 2 .Assume that per capita income I is $6,000.At a price P of $45, the price elasticity of demand isA) 1.0.B) 2.25.C) 2D) -0.50.E) 2.50.

Question

The demand for watches is Q = 1,000P  -2.50 I 2 .Assume that per capita income I is $6,000.At a price P of $45, the price elasticity of demand isA) 1.0.B) 2.25.C)  2D)  -0.50.E) 2.50.

Michael Stevenson · Accepted Answer

Final Answer : E, Explanation :  The price elasticity of demand is given by the formula: E = dQ/dP * (P/Q). Given Q = 1,000P^-2.50I^2, differentiate with respect to P to get dQ/dP = -2.50 * 1,000 * P^-3.50 * I^2. Substituting P = 45 and I = 6,000 into the equation, and simplifying, the elasticity is -2.50, which is the absolute value of 2.50.

The demand for watches is Q = 1,000P ^-2.50I².Assume that per capita income I is $6,000.At a price P of $45, the price elasticity of demand is

A) 1.0.
B) 2.25.
C) 2
D) -0.50.
E) 2.50.

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The demand for watches is Q = 1,000P -2.50I2.Assume that per capita income I is $6,000.At a price P of $45, the price elasticity of demand isA) 1.0.B) 2.25.C) 2D) -0.50.E) 2.50.

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Learning Objectives

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Related questions

The demand for watches is Q = 1,000P ^-2.50I².Assume that per capita income I is $6,000.At a price P of $45, the price elasticity of demand is

A) 1.0.
B) 2.25.
C) 2
D) -0.50.
E) 2.50.