5 When the price of hot dogs is 150 each 500 hot dogs are so

5. When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After the price falls to $1.35 each, 510 hot dogs are sold every day. At the original price, what is the price elasticity of demand for hot dogs? a. -0.015 2 0 C. 5

Solution

price elasticity of demand = (%change in quantity ) / ( %change in price )

%change in quantity = ( 510 - 500 ) * 100 / 500 = 2

% change in price = (1.35-1.50 ) *100 / 1.50 = (-10)

price elasticity of demand = ( 2 ) / (-10 ) = (-0.2).

So , the price elasticity of demand for hot dogs is -0.2