question archive Suppose the gate fee at a national park increase from $25 while no other variable change
Suppose the gate fee at a national park increase from $25 while no other variable change
Subject:EconomicsPrice:2.88 Bought3
Suppose the gate fee at a national park increase from $25 while no other variable change. In consequence, the daily quantity of visitors decreases from 2,200 to 1,800. Calculate the absolute value of the price elasticity of demand.
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The Price Elasticity Of Demand is computed by dividing the change in the quantity demanded by the change in price. We will compute this below, assuming that the new price is $30.
Price Elasticity Of Demand = % Change in quantity demanded / % change in price
- % Change in quantity demanded = (2,200 - 1,800)/2,200 = 18.18% decrease
- % Change in price = (30 - 25)/25 = 20% increase
Price Elasticity Of Demand (absolute value) =18.18 / 20
Price Elasticity Of Demand (absolute value) = 0.91
The absolute value is thus 0.91.
