question archive A company named The Mad Hatter decides to increase the price of its hats from $28 to $38 per hat
A company named The Mad Hatter decides to increase the price of its hats from $28 to $38 per hat
Subject:EconomicsPrice:2.88 Bought3
A company named The Mad Hatter decides to increase the price of its hats from $28 to $38 per hat. As a result of this change, the quantity demanded of hats drops from 153 to 108 hats. What is the price elasticity of demand for its hats?
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Price elasticity of demand is given by
Ep = dQ%/dP%
Where
dP% = % change in price = (28 - 38)/28 = -35.71%
dQ = % change in quantity = (153 - 108)/108 = 41.67%
Therefore
Ep = -35.71%/41.67% = - .857
