Preciousbuseniidn
Answered

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when price of indomie noodles was lowered from #50 to #40 per unit, quantity demanded increases from 400 to 600 units per week. calculate the coefficient of price elasticity of demand and determine whether by lowering price this firm has made a wise decision ​

Sagot :

MrRoyalidn

Answer:

The price elasticity of demand is -10

Step-by-step explanation:

Given

[tex]p_1,p_2 = 50,40[/tex]

[tex]q_1,q_2 = 400,500[/tex]

Solving (a): The coefficient of price elasticity of demand (k)

This is calculated as:

[tex]k = \frac{\triangle q}{\triangle p}[/tex]

So, we have:

[tex]k = \frac{500 - 400}{40 - 50}[/tex]

[tex]k = \frac{100}{-10}[/tex]

[tex]k = -10[/tex]

Because |k| > 0, then we can conclude that the company made a wise decision.

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