When the price of spicy sauce was $\$ 10$, people bought 100 jars. When the price increased to $\$ 12$, people only bought 40 jars.

What is the price elasticity of demand for spicy sauce?
Choose 1 answer:
(A) 8.98
(B) 7.5
(C) -8.98
(D) 0.33
(E) 3

Question

When the price of spicy sauce was $\$ 10$, people bought 100 jars. When the price increased to $\$ 12$, people only bought 40 jars.

What is the price elasticity of demand for spicy sauce?
Choose 1 answer:
(A) 8.98
(B) 7.5
(C) -8.98
(D) 0.33
(E) 3

Accepted Answer

∻Solution∻ ‖ a ⋮ Calculating Percentage Change in Quantity: The percentage change in quantity demanded is calculated using the formula $\% \Delta Q_d = \frac{Q_{new} - Q_{old}}{Q_{old}} imes 100\%$. Substituting the given values, we get $\% \Delta Q_d = \frac{40 - 100}{100} imes 100\% = -60\%$. ‖ ‖ b ⋮ Calculating Percentage Change in Price: The percentage change in price is calculated using the formula $\% \Delta P = \frac{P_{new} - P_{old}}{P_{old}} imes 100\%$. Substituting the given values, we get $\% \Delta P = \frac{12 - 10}{10} imes 100\% = 20\%$. ‖ ‖ c ⋮ Calculating Price Elasticity of Demand: The price elasticity of demand is calculated using the formula $E_d = \frac{\% \Delta Q_d}{\% \Delta P}$. Substituting the calculated values, we get $E_d = \frac{-60\%}{20\%} = -3$. ‖ ∻Answer∻ ⚹ (E) 3 ⚹ ∻Key Concept∻ ⚹ Price Elasticity of Demand ⚹ ∻Explanation∻ ⚹ The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good, calculated as the percentage change in quantity demanded divided by the percentage change in price. A negative value indicates an inverse relationship between price and quantity demanded, which is typical for most goods. ⚹◊What is the formula for calculating price elasticity of demand?⍭ Generate me a similar question◊

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