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Suppose that the quantity of chain saws sold increased from 200 to 400 when the price fell from $225 to $175. Over this price range, the absolute value of the price elasticity of demand for chain saws is.

Sagot :

Answer: 2.67

Explanation:

since that will be the chain saw demand price elasticity in absolute terms, or isa.

Ayuneidn

When the price fell from  $225 to $175, the sales increased from 200 to 400. The price elasticity of demand is 3.5

The price elasticity of demand measures how sensitive the change of quantity to the change of price.

Price elasticity of demand = % change in quantity / % change in price

In the given problem:

change in quantity = 400 - 200 = 200

% change in quantity  = 200/200 = 100%

change in price = $175 - $225 = -$50

% change in price  = 50 / 175 = 28.57%

Note that we always take the absolute or positive value when calculating the price elasticity.

Hence,

Price elasticity of demand = % change in quantity / % change in price

                                            = 100% / 28.57% = 3.5

Learn more about price elasticity here:

https://brainly.com/question/24596748

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