Price Elasticity of Demand Calculation: Beef Price Increase

What is the price elasticity of demand for beef when the price increases from $4 to $6 per lb. and the quantity demanded decreases from 25 to 20 million lbs.?

The price elasticity of demand for beef is -0.4.

The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price.

In this case, the price of beef has increased from $4 to $6 per lb. and the quantity demanded has decreased from 25 to 20 million lbs. The percentage change in quantity demanded is calculated as (20-25)/25 = -0.2, and the percentage change in price is (6-4)/4 = 0.5.

Therefore, the price elasticity of demand for beef is -0.2/0.5 = -0.4. This means that for every 1% increase in price, the demand for beef decreases by 0.4%.

Understanding price elasticity of demand is essential for businesses to make informed decisions about pricing strategies and consumer behavior.