The correct answer is: "price elasticity of demand = 4.11"
The demand function represents the quantity of a certain good or service that consumers are willing to purchase in the market at different price levels. The law of demand states that there is an inverse relationship between price and quantity demanded (ceteris paribus, hence, given that the rest remains equal). Therefore, when the price charged decreases, the amount that consumers are willing to purchase increases.
In turn, the elasticity of the demand function measures the sensitiveness of the quantity demanded by consumers when there is a certain price change. It is computed by dividing the percentage change of the price variation by the percentage change in the amount demanded and comparing the two figures like in the chart attached. The formula is attached in a second picture, afterwards the absolute value is applied to the result obtined from the formula.
Price elasticity of demand= I [(664000-495000)/495000)] / [(2,430-2,650)/2,650] I= 4.11
(the absolute value has been already applied in the formula I I )
This demand is elastic because the figure obtained exceeds 1. It means that the size of the amount demanded is larger than the size of the price variation, both measured in percentage.
