What is your best estimate of the price elasticity of demand for salmon at Francesca's?
The best estimate of the price elasticity of demand for salmon at Francesca's is approximately -1.25. The correct option is e. 1.25.
Calculation of Price Elasticity of Demand
To estimate the price elasticity of demand for salmon at Francesca's, we can use the midpoint formula:
Price elasticity of demand = ((Q2 - Q1) / ((Q2 + Q1) / 2)) / ((P2 - P1) / ((P2 + P1) / 2))
Using the given information:
Q1 = 30 plates
Q2 = 18 plates
P1 = $20
P2 = $30
Plugging these values into the formula:
Price elasticity of demand = ((18 - 30) / ((18 + 30) / 2)) / (($30 - $20) / (($30 + $20) / 2))
Price elasticity of demand = ((-12) / (48 / 2)) / (10 / (50 / 2))
Price elasticity of demand = (-12 / 24) / (10 / 25)
Price elasticity of demand = (-0.5) / (0.4)
Price elasticity of demand ≈ -1.25
Therefore, The best estimate of the price elasticity of demand for salmon at Francesca's is approximately -1.25. The correct option is e. 1.25.