Question

Calculate the slope and elasticity of demand using the following information:
Price: $7.99
Quantity: 3 units
Price drops to $4.99
Quantity goes up to 8 units
Show your work to get full credit.

Answer 1

Based on the price and quantity changes, the following are correct:

• Slope is -0.6.
• Elasticity of demand is -4.44.

What is the slope of the above?

Slope can be found as:

= Change in price / Change in quantity

= (4.99 - 7.99) / (8 - 3)

= -0.6

What is the elasticity of demand?

This can be found as:

= Percentage change in quantity / percentage change in price

= ( (8 - 3) / 3) ÷ ( ( 4.99 - 7.99) / 7.99)

= -4.44

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