To calculate the own-price elasticity of demand (PED), we use the following formula:

$\text{PED} = \frac{\% \text{change in quantity demanded}}{\% \text{change in price}}$

Where:

• $\% \text{change in quantity demanded} = \frac{\text{new quantity} - \text{old quantity}}{\text{old quantity}} \times 100$
• $\% \text{change in price} = \frac{\text{new price} - \text{old price}}{\text{old price}} \times 100$

Let's break it down step by step.

1. Calculate the percentage change in quantity demanded:

• Old quantity = 80 units
• New quantity = 100 units

$\% \text{change in quantity} = \frac{100 - 80}{80} \times 100 = 25\%$

2. Calculate the percentage change in price:

• Old price = $18
• New price = $10

$\% \text{change in price} = \frac{10 - 18}{18} \times 100 = -44.44\%$

3. Apply the values to the PED formula:

$\text{PED} = \frac{25}{-44.44} \approx -0.56$

Thus, the own-price elasticity of demand at $10 is approximately -0.56 (rounded to 2 decimal places).

This indicates that the demand is inelastic since the absolute value of the PED is less than 1.

Would you like further details or have any questions?

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Here are 5 related questions:

1. What does it mean when demand is inelastic?
2. How does the elasticity of demand impact a business’s pricing strategy?
3. Can you explain the concept of perfectly inelastic demand?
4. How would the elasticity change if the price dropped to $5 and the quantity increased to 150 units?
5. What factors could influence the elasticity of demand for boba tea?

Tip: Elasticity of demand helps businesses understand how sensitive consumers are to price changes, guiding pricing decisions effectively.