Bugs Bunny has a boba tea shop in downtown SLC. He decreased his prices from $18 to $10 and saw an increase in quantity sold from 80 units to 100 units. Calculate the own-price elasticity of demand at $10. Please round your answer to 2 decimal places.

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.

Learn how to calculate the own-price elasticity of demand for a boba tea shop when the price drops from $18 to $10, leading to an increase in sales from 80 to 100 units. Understand how elasticity helps determine if demand is elastic or inelastic with a step-by-step guide. Suitable for Grades 10-12.

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