## Answers

1.

Initial price(P1)= $5.50

Initial quantity demand(Q1)= 5

Now as price decreases:

New price(P2)= $4.50

New quantity demand(Q2)= 15

Elasticity of demand= % change in quantity demand / % change in price

% Change in quantity demand= (Change in Quantity/Q1) x 100

% Change in quantity demand= [(15-5)/5] x 100= 200%

% Change in Price= (Change in price/P1) x 100

% Change in Price= [($4.50-$5.50)/$5.50] x 100= 18.18%

**Price Elasticity of demand= 200% / 18.18%= 11.00**

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