Question

Demand function $x$, for a certain commodity is given as $x=200-4p$ where $p$ is the unit price.
Find:
a. elasticity of demand as a function of $p$.
b. elasticity of demand when $p=10$, interpret your result.

Answer 1

a, $x=200-4p$

$\eta =\frac{\partial x}{\partial p}\times \frac{p_0}{x_0}$

$=-4\times \frac{p}{200-4p}$

b, $\eta =-4\times \frac{10}{200-40}=\frac{-40}{160}=\frac{1}{4}$

$\eta <1$, goods price inelastic.