2. If the price of Beer is $2 a bottle, Biff is willing to buy 30 bottles. If the price of Beer is $4 a bottle, Biff is willing to buy 20 bottles. What is Biff's Price Elasticity of Demand? Is his demand elastic or inelastic?
2. If the price of Beer is $2 a bottle, Biff is willing to buy 30 bottles. If the price of Beer is $4 a bottle, Biff is willing to buy 20 bottles. What is Biff's Price Elasticity of Demand? Is his demand elastic or inelastic?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![**Question 2: Price Elasticity of Demand**
If the price of beer is $2 a bottle, Biff is willing to buy 30 bottles. If the price of beer is $4 a bottle, Biff is willing to buy 20 bottles. What is Biff's Price Elasticity of Demand? Is his demand elastic or inelastic?
**Solution Explanation:**
To calculate the price elasticity of demand, use the formula:
\[ \text{Price Elasticity of Demand} = \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Price}} \]
1. **Calculate the Percentage Change in Quantity Demanded:**
\[
\frac{30 - 20}{(30 + 20)/2} \times 100 = \frac{10}{25} \times 100 = 40\%
\]
2. **Calculate the Percentage Change in Price:**
\[
\frac{4 - 2}{(4 + 2)/2} \times 100 = \frac{2}{3} \times 100 \approx 66.67\%
\]
3. **Calculate the Price Elasticity of Demand:**
\[
\frac{40\%}{66.67\%} \approx 0.6
\]
- **Conclusion:**
Since the calculated price elasticity of demand is less than 1, Biff's demand is inelastic. This means that the percentage change in quantity demanded is less than the percentage change in price.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F09726091-0417-4055-b240-2895ea40eb4f%2Fde932585-bf5a-49a3-abdc-0544d0f85134%2Fn7z5bp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Question 2: Price Elasticity of Demand**
If the price of beer is $2 a bottle, Biff is willing to buy 30 bottles. If the price of beer is $4 a bottle, Biff is willing to buy 20 bottles. What is Biff's Price Elasticity of Demand? Is his demand elastic or inelastic?
**Solution Explanation:**
To calculate the price elasticity of demand, use the formula:
\[ \text{Price Elasticity of Demand} = \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Price}} \]
1. **Calculate the Percentage Change in Quantity Demanded:**
\[
\frac{30 - 20}{(30 + 20)/2} \times 100 = \frac{10}{25} \times 100 = 40\%
\]
2. **Calculate the Percentage Change in Price:**
\[
\frac{4 - 2}{(4 + 2)/2} \times 100 = \frac{2}{3} \times 100 \approx 66.67\%
\]
3. **Calculate the Price Elasticity of Demand:**
\[
\frac{40\%}{66.67\%} \approx 0.6
\]
- **Conclusion:**
Since the calculated price elasticity of demand is less than 1, Biff's demand is inelastic. This means that the percentage change in quantity demanded is less than the percentage change in price.
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