Suppose that at a price of $2.60, the quantity of output demanded is 17, and at a price of $6.30, the quantity of output demanded is 8. What is the elasticity of demand? (Ignore the negative sign.)

Answer: elastic (e = 2.43)

Explanation:

The price elasticity formulae is given below as

Elasticy of price = change in quantity demanded / change in price.

P1 = $2.60, P2 = $6.30, q1 = 17 and q2 = 8

e = q2 - q1 / P2 - P1

e = 8 - 17 / 6.30 - 2.60

e = - 9 / 3.7

e = - 2.43

We take the modulus of e to have a positive value. Hence e = 2.43

Since e is greater than 1, then the elasticity of demand is elastic