Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000.Along this portion of the demand curve,price elasticity of demand is:

A) 0.8.
B) 1.2.
C) 1.6.
D) 8.0.

Question

Jennifer Schmitt · Accepted Answer

Final Answer : B, Explanation :  The price elasticity of demand is calculated using the formula: [(Q2 - Q1) / (Q2 + Q1) / 2] / [(P2 - P1) / (P2 + P1) / 2], where Q1 and Q2 are the initial and final quantities, and P1 and P2 are the initial and final prices. Substituting the given values: [(176,000 - 224,000) / (176,000 + 224,000) / 2] / [($19.80 - $16.20) / ($19.80 + $16.20) / 2] = [-48,000 / 200,000] / [3.6 / 18] = -0.24 / 0.2 = -1.2. The negative sign indicates the direction of the change, but elasticity is often reported as an absolute value, making the answer 1.2.

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000.Along this portion of the demand curve,price elasticity of demand is:

A) 0.8.
B) 1.2.
C) 1.6.
D) 8.0.

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Learning Objectives

Related questions

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000.Along this portion of the demand curve,price elasticity of demand is:A) 0.8.B) 1.2.C) 1.6.D) 8.0.

Definitions

Learning Objectives

Learning Objectives

Related questions

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000.Along this portion of the demand curve,price elasticity of demand is:

A) 0.8.
B) 1.2.
C) 1.6.
D) 8.0.