http://economics.about.com/cs/micfrohelp/a/priceelasticity.htm
It shows us really clearly about elasticity.
But.....as we know,for example :
PED=%change in quantity demand/%change in price
in the text:
Calculating the Percentage Change in Quantity Demanded
The formula used to calculate the percentage change in quantity demanded is:[QDemand(NEW) - QDemand(OLD)] / QDemand(OLD)
By filling in the values we wrote down, we get:
[110 - 150] / 150 = (-40/150) = -0.2667
We note that % Change in Quantity Demanded = -0.2667 (We leave this in decimal terms. In percentage terms this would be -26.67%). Now we need to calculate the percentage change in price.
Calculating the Percentage Change in Price
Similar to before, the formula used to calculate the percentage change in price is:[Price(NEW) - Price(OLD)] / Price(OLD)
By filling in the values we wrote down, we get:
[10 - 9] / 9 = (1/9) = 0.1111
We have both the percentage change in quantity demand and the percentage change in price, so we can calculate the price elasticity of demand.
Final Step of Calculating the Price Elasticity of Demand
We go back to our formula of:PEoD = (% Change in Quantity Demanded)/(% Change in Price)
We can now fill in the two percentages in this equation using the figures we calculated earlier.
PEoD = (-0.2667)/(0.1111) = -2.4005
But as the formula...The PERCENTAGE of quantity demand.....so why they don't multiply by 100 because its persentage,and in the exam..if we want to calculate elasticity for example PES,so do we have to multiply by 100% quantity demand and price or we don't have to?Thanks
2 comments:
Can anybody help me???...do we have to change in percentage or not??
please...
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