Suppose the demand for baby shoes in a small town is described by the equation Q = 50 - aP, where...
Question:
Suppose the demand for baby shoes in a small town is described by the equation Q = 50 - aP, where Q is the quantity of baby shoes demanded, P is the average price of a pair of baby shoes, and the coefficient on P (in this case "-a") measures the effect of a $1 change in price on quantity demanded. If the price elasticity of demand is known to be -0.5, what is the coefficient if the initial price is $10 and quantity demanded is 100?
a. -0.5
b. -20
c. -0.2
d. -5
Point Price Elasticity
The price elasticity of demand can be calculated over a range of values and its expressed as the arc price elasticity. There is also a calculation for point price elasticity where the elasticity is calculated, not over a range of values, but at an exact point on the demand curve.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answer
The answer is d. - 5
The equation for the point price elasticity is the derivative of the inverse demand equation times price over quantity.
{eq}e_{...
See full answer below.
Learn more about this topic:
Get access to this video and our entire Q&A library
The Elasticity of Demand: Definition, Formula & Examples
from
Chapter 3 / Lesson 7Understand what elasticity of demand is and discover different types of elasticity of demand. Learn how it is measured and review the elasticity of demand formula.
Related to this Question
The accompanying table shows the price and...
The demand for Olin skis is likely to be? a....
The ECON6351 company was considering a price...
As the price of gasoline ranges from $3.00 to...
The demand curve of a product is given by ...
During the winter months, the nightly rate is...
1. Which of the following statements regarding...
Suppose the firm dropped the price to $2.50....
What determines the level of prices in a...
The following is the demand function for a...
The demand function for a certain make of...
If the demand equation is x = square root (400...
What is Financial Accounting? - Definition & Purpose
Financial accounting functions to give data about a company's financial standing to outside people so they can make decisions. Explore the definition and purpose of financial accounting and discover the meanings of double-entry bookkeeping, financial statements, and the acronyms GAAP, FASB, and SEC.
Price Elasticity of Demand Overview & Formula | How to Find Price Elasticity
Learn what price elasticity is. Discover how to find price elasticity of demand, study examples of price elasticity, and examine a price elasticity graph.
Price Elasticity of Supply | What is Elasticity of Supply?
Understand what elasticity of supply is. Learn more about price elasticity of supply. Know about elastic and inelastic supply with some elastic supply examples.
Marginal Rate of Substitution: Definition, Formula & Examples
The marginal rate of substitution shows how quickly a person will substitute or replace one product for a different one. Study the definition, formula, and examples of the marginal rate of substitution, how producers use it, and differing quantities.
Income Elasticity of Demand in Microeconomics
In microeconomics, the principle of income elasticity of demand, which illustrates the relationship between demand and income, is important to understand the field as a whole. In this lesson, dive into the definition of income elasticity of demand and understand how it impacts normal goods, necessities, and inferior goods.
Elastic Demand: Definition, Formula & Examples
In this lesson, you will be introduced to the concept of an elastic demand and how to determine if the demand is elastic. Two methods will be presented along with examples.
Indifference Curves: Use & Impact in Economics
In economics, indifference curves show which goods in the marketplace bring equal satisfaction to consumers, leaving them indifferent to which goods they purchase. Explore the definition, learn about their use and impact in economics, and review how they work.
Market Equilibrium from a Microeconomics Perspective
In microeconomics, market equilibrium is the point at which demand and supply are equal at a certain price level. Learn about the definition and graph of market equilibrium, and explore the shifts in supply and demand as equilibrium changes.
The World Bank, IMF & Other International Banking Organizations
The World Bank was created to help in the economic development of middle and lower-income countries. Discover the purpose of the World Bank and the World Bank Group, the International Monetary Fund, or IMF, and other international banking organizations, such as the Bank for International Settlement.
Causes of Supply and Demand Changes in Microeconomics
Causes of supply and demand changes in microeconomics include factors such as market forces and equilibrium price. Explore the definition of market forces and learn about demand force and supply force along a curve.
Understanding Long-Run Production Decisions in Economics
To be successful, businesses must prepare for the future, using a strategic plan that considers their long-run goals. Learn how to understand long-run production decisions in economics. Gain understanding by reviewing the definition of long-run production, importance of innovation, and examples of long-run production.
Elasticity in Economics | Symbol, Theory & Formula
Learn the definition of elasticity in economics. Understand the elasticity formula, the ways used to measure elasticity, and who created the theory of elasticity.
Elasticity in Economics: Practice Problems
Elasticity in economics is the change in price for some item depending on the performance of some other relevant thing. Take a look at three different elasticity examples in economics using price, income, and cross-price models.
The Importance of Consumer Choice in Economics
Producers exhaust many resources to understand consumer choice because economics depends on the consumer to work. Explore the importance of consumer choice, typical assumptions about the consumer and why businesses care in this lesson.
Income Effect in Economics: Examples | What is the Income Effect?
Discover the definition of income effect in economics; learn how price and income contribute to the income effect and see some examples and graphs of the income effect.
Price Elasticity of Demand in Microeconomics
In microeconomics, the principle of price elasticity of demand is important to understand. Learn the definition of price elasticity of demand, understand the formula and its categories, and see some calculation examples.
Marginal Rate of Substitution | Economics, Formula & Calculator
Learn how to calculate the marginal rate of substitution and its application in economics. View examples of the formula in use with real world application.
Consumer Surplus: Definition, Formula & Examples
Consumer surplus is determined by our willingness to buy over the actual price of a product, good or service. Learn more about it's definition, formula and examples as well as who creates and determines consumer supply.
Law of Demand in Economics | Basic Principle & Examples
What is demand? What is the law of demand? Learn the definition of demand in economics and the basic principle of demand.
Marginal Benefit Economics: Principle & Examples | What is Marginal Benefit?
In this lesson, learn what marginal benefits are in economics. Understand the principle of diminishing marginal benefits and find marginal benefit examples.
Explore our homework questions and answers library
Browse
by subject