In a local market, the monthly price of internet access service decreases from $20 to $10, and the total quantity of monthly accounts across all internet access providers increases from 100,000 to 200,000.
a. What is the price elasticity of demand?
b. is demad elastic, unit-elastic, or ineleastic?
c. If the internet access providers wanted to increase price by 5%, what will be the percent change in quantity demanded?
A. PED = ((p2-p1)/p2)/((q2-q1)/(q2) = (-10/10)/(-100k/200k) = -1/0.5 = -2
B. Demand is elastic
C. Since PED is 2 it can be predicted that a 5% increase in price will result in a 10% decrease in quantity demanded.
January 19th, 2010 at 3:50 pm
A. PED = ((p2-p1)/p2)/((q2-q1)/(q2) = (-10/10)/(-100k/200k) = -1/0.5 = -2
B. Demand is elastic
C. Since PED is 2 it can be predicted that a 5% increase in price will result in a 10% decrease in quantity demanded.
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