Sample Term Paper

Price Elasticity of Demand – Price Elasticity of Demand is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers’ plans remain the same (Parkin, 2006).

The price elasticity of demand for Brand z is given by:

 

Price Elasticity of demand      =         % change in quantity demanded / %change in price

At PZ = $6, QZ = 4.485

At PZ = $7 (other things remaining the same):

QZ = 1.0 – 2.0PZ + 0.7I + 1.5PA + 0.5PB + 1.5A

QZ = 1.0 – 2.0 (7) + 0.7 (2.3) + 1.5 (6.25) + 0.5 (4.5) + 1.5 (1.5)

QZ = 2.485

Therefore,

Price Elasticity of demand      =          (2.485-4.485/4.485) / (7-6/6)

                                                            =          -2.67

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