QQuestionEconomics
QuestionEconomics
If the price elasticity of demand is equal to 0.5, is demand elastic, inelastic, or unitary elastic?
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Answer
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Step 1:I'll solve this problem step by step following the specified LaTeX formatting guidelines:
Step 2:: Understand the Definition of Price Elasticity of Demand
- If $$|E_{p}| = 1$$: Unitary elastic demand
Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. The absolute value of the elasticity coefficient determines the type of elasticity:
Step 3:: Analyze the Given Elasticity Value
The problem states that the price elasticity of demand is $$0.5$$.
Step 4:: Compare the Absolute Value to the Elasticity Thresholds
The absolute value of the elasticity is $$|0.5| = 0.5
Step 5:: Determine the Type of Elasticity
Since $$0.5 < 1$$, the demand is inelastic.
Final Answer
When the price elasticity of demand is 0.5, the demand is INELASTIC.
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