A DEMAND SCHEDULE FOR ABC
DETERGENT
PRICE/UNIT ($)
QUANTITY
10
1000
20
700
30
500
40
250
The Method to find out the elasticity of demand for ABC
detergent if the price increases from $20 to $30:
1/. The original price method
(500-700) / (30-20) X 20/700
Ed = -|0.57| (Corr. 2 s.f)
2/. The average price and quantity method
(500-700) (30+20) / 2
------------ X ----------------(30-20)
(500+700) /2
Ed = -|0.83|(Corr. 2 s.f)
Since Ed< 1, therefore the elasticity of demand for
ABC detergent is INELASTIC.
DIFFERENT TYPES OF PRICE ELASTICITY:
Elastic : Ed > 1
Inelastic : Ed < 1
Unitarily elastic : Ed = 1
Perfectly inelastic : Ed = 0
Perfectly elastic: Ed = infinitive
Price $
P2
-Inelastic demand
-If price increase,
=>% Increase in price > % decrease in Qd
-Gain > Loss
-Total Revenue increase
P1
GAIN
LOSS
Qd/period