The demand curve is: QD = 500 - 1/2 P
a. Calculate the (point) price elasticity of demand when price is $100. Is demand elastic or inelastic?
b. Calculate the (point) price elasticity of demand when price is $700. Is demand elastic or inelastic?
c. Find the point at which point elasticity is equal to -1.
a. Elasticity = -1/2 (100/450 ) = -0.11, and is inelastic.
b. Elasticity = -1/2(700/150 ) = -2.5, and is elastic.
c. Elasticity is -1 at the midpoint of the demand curve, which is at a price of $500 and a quantity of 250.
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