During a recent 30-day period, the Squish restaurant sold 600 Ocean Delights at a price of $6.45. During the next 30-day period, the price was increased to $6.95, and 400 Ocean Delights were sold. Calculate the price elasticity of demand, and indicate if demand is elastic or inelastic. Group of answer choices 1, elastic 4.125, elastic 4.125, inelastic 1, inelastic

-4.3; inelastic

Explanation:

Initial price = $6.45

Initial quantity demanded = 600

New price = $6.95

New quantity demanded = 400

Percentage change in Quantity demanded:

= (Change in quantity demanded ÷ Initial quantity demanded) × 100

= [(400 - 600) ÷ 600] × 100

= (-200 ÷ 600) × 100

= 0.3333 × 100

= -33.33%

Percentage change in price:

= (Change in price ÷ Initial price) × 100

= [($6.95 - $6.45) ÷ $6.45] × 100

= ($0.5 ÷ $6.45) × 100

= 0.0775 × 100

= 7.75%

Therefore, the price elasticity of demand is as follows:

= Percentage change in quantity demanded ÷ Percentage change in price

= -33.33 ÷ 7.75

= -4.3

Hence, the price elasticity of demand is inelastic.

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