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5. Calculating the price elasticity of demand: A step-by-stepguide Suppose that during the past year, the price of a laptop computer rose from $2,750 to $2,880. During the same time period, consumer sales decreased from 446,000 to 321,000 laptops.

5. Calculating the price elasticity of demand: A step-by-stepguide Suppose that during the past year, the price of a laptop computer rose from $2,750 to $2,880. During the same time period, consumer sales decreased from 446,000 to 321,000 laptops.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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## 5. Calculating the Price Elasticity of Demand: A Step-by-Step Guide Suppose that during the past year, the price of a laptop computer rose from $2,750 to $2,880. During the same time period, consumer sales decreased from 446,000 to 321,000 laptops. Calculate the elasticity of demand between these two price-quantity combinations by using the following steps. After each step, complete the relevant part of the table with the appropriate answers. (*Note: For decreases in price or quantity, enter values in the Change column with a minus sign.*) ### Table: Price Elasticity of Demand Calculation | | Original | New | Average | Change | Percentage Change | |-------|-----------|----------|----------|-------------|-------------------| | Quantity | | | | | | | Price | $ | $ | | $ | | ### Step-by-Step Instructions: **Step 1:** Fill in the appropriate values for original quantity, new quantity, original price, and new price. **Step 2:** Calculate the average quantity by adding the original quantity and the new quantity, and then dividing by two. Do the same for the average price. **Step 3:** Calculate the change in quantity by subtracting the original quantity from the new quantity. Do the same for the change in price. **Step 4:** Calculate the percentage change in quantity demanded by dividing the change in quantity by the average quantity. Do the same to calculate the percentage change in price. **Step 5:** Calculate the price elasticity of demand by dividing the percentage change in quantity demanded by the percentage change in price, ignoring the negative sign. --- ### Calculation Example Using Provided Data: **1. Fill in Values:** | | Original | New | | | |-------|-----------|---------|--------|------| | Quantity | 446,000 | 321,000 | | | | Price | $2,750 | $2,880 | | | **2. Calculate Averages:** - Average Quantity = (446,000 + 321,000) / 2 - Average Price = ($2,750 + $2,880) / 2 **3. Calculate Changes:** - Change in Quantity = 321,000 - 446,000
Transcribed Image Text:## 5. Calculating the Price Elasticity of Demand: A Step-by-Step Guide Suppose that during the past year, the price of a laptop computer rose from $2,750 to $2,880. During the same time period, consumer sales decreased from 446,000 to 321,000 laptops. Calculate the elasticity of demand between these two price-quantity combinations by using the following steps. After each step, complete the relevant part of the table with the appropriate answers. (*Note: For decreases in price or quantity, enter values in the Change column with a minus sign.*) ### Table: Price Elasticity of Demand Calculation | | Original | New | Average | Change | Percentage Change | |-------|-----------|----------|----------|-------------|-------------------| | Quantity | | | | | | | Price | $ | $ | | $ | | ### Step-by-Step Instructions: **Step 1:** Fill in the appropriate values for original quantity, new quantity, original price, and new price. **Step 2:** Calculate the average quantity by adding the original quantity and the new quantity, and then dividing by two. Do the same for the average price. **Step 3:** Calculate the change in quantity by subtracting the original quantity from the new quantity. Do the same for the change in price. **Step 4:** Calculate the percentage change in quantity demanded by dividing the change in quantity by the average quantity. Do the same to calculate the percentage change in price. **Step 5:** Calculate the price elasticity of demand by dividing the percentage change in quantity demanded by the percentage change in price, ignoring the negative sign. --- ### Calculation Example Using Provided Data: **1. Fill in Values:** | | Original | New | | | |-------|-----------|---------|--------|------| | Quantity | 446,000 | 321,000 | | | | Price | $2,750 | $2,880 | | | **2. Calculate Averages:** - Average Quantity = (446,000 + 321,000) / 2 - Average Price = ($2,750 + $2,880) / 2 **3. Calculate Changes:** - Change in Quantity = 321,000 - 446,000
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