Suppose that during the past year, the price of a virtual reality headset rose from $4,750 to $4,880. During the same time period, consumer sales decreased from 396,000 to 271,000 headsets.
Calculate the elasticity of demand between these two price-quantity combinations by using the following steps. After each step, complete the relevant part of the table with the appropriate answers. (Note: For decreases in price or quantity, enter values in the Change column with a minus sign.)
Original
New
Average
Change
Quantity
Price
$
$
$
$
Percentage Change
Step 1: Fill in the appropriate values for original quantity, new quantity, original price, and new price.
Step 2: Calculate the average quantity by adding the original quantity and the new quantity, and then dividing by two. Do the same for the average price.
Step 3: Calculate the change in quantity by subtracting the original quantity from the new quantity. Do the same for the change in price.
Step 4: Calculate the percentage change in quantity demanded by dividing the change in quantity by the average quantity. Do the same to calculate the percentage change in price.
Step 5: Calculate the price elasticity of demand by dividing the percentage change in quantity demanded by the percentage change in price, ignoring
