Answer to Question #298800 in Economics of Enterprise for kinemena

Question

Consider the following demand function: QD = 25/P2. Show that the point elasticity of demand for that function is always equal to −2.

Answer 1

$E_d= \frac{\Delta Q}{\Delta P}\times \frac{P}{Q}$

$\frac{\Delta Q}{\Delta P}= Slope of the demand function$

$Q_D= \frac{25}{P^2}$

$Q_D= 25P^{-2}$

$\frac{\Delta Q}{\Delta P}= -50P^{-3}$