If the change in quantity demanded is 40 while the change in

If the change in quantity demanded is 40% while the change in price of a good is 30%, what is the price elasticity of demand? What kind of good is this?

If the change in quantity demanded is 20% while the change in price of a good is 50%, what is the price elasticity of demand? What kind of good is this?

Solution

The elasticity of a good can be calculated by: % change in quantity / % change in price

a) e = 40% / 30 % = 1.333 . The demand of this good is elastic as e > 1.

b) e = 20% / 50% = 0.4. The demand of this good is inelastic as e < 1.