Questions

To determine whether demand is elastic, inelastic, or unit elastic, we can use the price elasticity of demand (PED) formula:

$\text{Price elasticity of demand}=\frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}}$

Given:

• Percentage change in price = 10%
• Percentage change in quantity demanded = -15% (since quantity demanded decreases)

Now, calculate the price elasticity of demand:

$\text{PED}=\frac{-15\%}{10\%}=-1.5$

Interpretation:

• If |PED| > 1, demand is elastic.
• If |PED| < 1, demand is inelastic.
• If |PED| = 1, demand is unit elastic.

In this case, since the absolute value of the price elasticity of demand is 1.5 (which is greater than 1), demand is elastic.

Final Answer:

Demand is elastic.