Rising Apple Prices

Price Elasticity of Demand measures a commodity 's response rate of quantity demanded caused by price changes . The formula for price elasticity of demand is change in quantity demanded change in price In to know the price elasticity of demand for apples , we would first need to solve for the percentage change in quantity demanded Before the price increase , the quantity of apples you demanded was 35 pounds a month , after the price increased your demand dropped to 20 pounds a month . With this in mind we could now solve for the percentage

br change in the quantity of apples you demand (20 pounds - 35 pounds /35 pounds - .4285714

After solving for the change in quantity demanded , we now need to solve for the percentage change in price . Apples used to cost 3 per pound now it costs 3 .5 per pound . Using these data , we could come up with the following equation 3 .5 - 3 3 .166667

Now that we have both the percentage changes in quantity demanded and price , we could now solve for the price elasticity of demand

- .4285714 .1666667 1 .4914283

If price elasticity of demand is greater than 1 , the demand of a commodity is said to be elastic . Since price elasticity of demand for apples is 1 .4914283 is greater than 1 , your demand for this commodity is inelastic . This means that the quantity of apples you demand is greatly affected by price (Moffat , M

References

Moffat , M . Price Elasticity of Demand . Retrieved March 9 , 2008 from http /economics .about .com /cs /micfrohelp /a /priceelasticity .htm PAGE

PAGE 1 Price elasticity of demand...