1. An increase in the price of a good of $ 15 to $ 20 reduces the quantity demanded from 20,000 to...

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1. An increase in the price of a good of $ 15 to $ 20 reduces the quantity demanded from 20,000 to 5,000. Calculate the price elasticity of demand.2. If the price elasticity of demand for gasoline is 0.3 and the current price is $ 1.20 per gallon, what increase in the price of gasoline would have the effect of reducing consumption by 10%?3. An increase in the price of a good whose demand is elastic will have the effect of reducing the total revenue of the company. Explain
	
Document Preview: An increase in the price of a good of $ 15 to $ 20 reduces the quantity demanded from 20,000 to 5,000. Calculate the price elasticity of demand.If the price elasticity of demand for gasoline is 0.3 and the current price is $ 1.20 per gallon, what increase in the price of gasoline would have the effect of reducing consumption by 10%?An increase in the price of a good whose demand is elastic will have the effect of reducing the total revenue of the company. Explain

David · Accepted Answer

1. An increase in the price of a good of $ 15 to $ 20 reduces the quantity 
demanded from 20,000 to 5,000. Calculate the price elasticity of demand. 
Ans. 
 
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in 
Price 
% Change in Quantity Demanded = (20,000 – 5,000)/20,000 = 75% 
% Change in Price = (20-15)/15 = 33.33% 
 
Price Elasticity of Demand = 75 %/33.

1. An increase in the price of a good of $ 15 to $ 20 reduces the quantity demanded from 20,000 to 5,000. Calculate the price elasticity of demand. 2. If the price elasticity of demand for gasoline is...

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