Suppose that in a month the price of oranges increases from $.75 to $1. At the same time, the quantity of oranges demanded decreases from 100 to 80. The price elasticity of demand for oranges (calculated using the initial value formula) is __________.

0.75

0.6

0.25

20

I have no idea

To calculate the price elasticity of demand using the initial value formula, we need to use the following formula:

Elasticity = (Percent change in quantity demanded) / (Percent change in price)

First, let's calculate the percent change in quantity demanded:

Percent change in quantity demanded = ((80 - 100) / 100) * 100 = -20%

Next, let's calculate the percent change in price:

Percent change in price = ((1 - 0.75) / 0.75) * 100 = 33.33%

Now, we can calculate the price elasticity of demand:

Elasticity = (-20% / 33.33%) β‰ˆ -0.6

Since price elasticity of demand is always expressed as a positive value, we take the absolute value of -0.6, which is 0.6.

Therefore, the correct answer is 0.6.

To calculate the price elasticity of demand, we need to use the formula:

Price Elasticity of Demand = ((Change in Quantity Demanded) / (Initial Quantity Demanded)) / ((Change in Price) / (Initial Price))

Let's plug in the given values:

Initial Quantity Demanded = 100
Change in Quantity Demanded = 80 - 100 = -20
Initial Price = 0.75
Change in Price = 1 - 0.75 = 0.25

Now let's calculate the price elasticity:

Price Elasticity of Demand = ((-20) / (100)) / (0.25 / 0.75)
Price Elasticity of Demand = (-0.2) / (0.3333)
Price Elasticity of Demand β‰ˆ -0.6

Since price elasticity is generally reported as an absolute value, the price elasticity of demand for oranges is 0.6 (option 0.6).

What is the initial value formula?