Suppose a department store has a sale on at silverware, if the price of a plate setting is reduced from Rs. \(300\) to Rs. \(200\) and the quantity demanded increase from \(3000\) plate-sittings to \(5000\) plate sittings, what is the price elasticity of demand for silverware?

(A) \(.8\)

(B) \(1.0\)

(C) \(1.25\)

(D) \(1.50\)

(A) \(.8\)

(B) \(1.0\)

(C) \(1.25\)

(D) \(1.50\)

Answer: C

We know are elasticity method as

\(=\dfrac{Q-Q1}{Q+Q1}\ast\dfrac{P+P1}{P-P1}\)

\(=\dfrac{3000-5000}{3000+5000}\ast\dfrac{300+200}{300-200}\)

\(=1.25\).

We know are elasticity method as

\(=\dfrac{Q-Q1}{Q+Q1}\ast\dfrac{P+P1}{P-P1}\)

\(=\dfrac{3000-5000}{3000+5000}\ast\dfrac{300+200}{300-200}\)

\(=1.25\).

So, Arc elasticity =1.25

(differences were large hence arc elasticity is used.)

To Keep Reading This Answer, Download the App

4.6

Review from Google Play

To Keep Reading This Answer, Download the App

4.6

Review from Google Play

Correct6

Incorrect0

Still Have Question?

Load More

More Solution Recommended For You