The price-elasticity of demand for a certain good is assumed to be proportional to the square- root of its price. When the price is p0 = 9, the demand is q0 = 540 and when the price is p1 = 16, the demand is q1 = 405. What will the demand be if the price increases to p = 25?
Added by Bradley A.
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Step 1: Calculate the price elasticity of demand using the formula: \[ \eta = \frac{q_1 - q_0}{q_1 + q_0} \div \frac{p_1 - p_0}{p_1 + p_0} \] Show more…
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