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In Cleveland, Clive sells 15 cloves at a price of $5 each. If Clive lowers his price by 10%, to $4.50 per clove, he will sell 16, or 6.67% more. In Dallas, Delores sells 15 cloves for $5 each. If Delores lowers her price by 2%, to $4.90, she will sell 16 cloves, or 6.67% more. Please state all price elasticities of demand as absolute values. Round answers to two places after the decimal when necessary.

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Answer:

The Price elasticity of demand shows the effect of a change in price on the quantity demanded. In other words, it shows the percentage change in quantity demanded as a result of a 1% change in price.

Price elasticity of demand = % change in quantity demanded / % change in price of good

Clive Cloves price elasticity:

= 6.67% / 10%

= 0.667

Delores Cloves price elasticity:

= 6.67% / 2%

= 3.335

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