a. Calculate the Price Elasticity of Demand (PED)

The formula for Price Elasticity of Demand is:

$PED = \frac{\% \Delta Q_d}{\% \Delta P}$

Step 1: Calculate Percentage Change in Quantity Demanded ($\% \Delta Q_d$)

$\% \Delta Q_d = \frac{\text{New Quantity} - \text{Old Quantity}}{\text{Old Quantity}} \times 100$

$\% \Delta Q_d = \frac{30 - 40}{40} \times 100 = \frac{-10}{40} \times 100 = -25\%$

Step 2: Calculate Percentage Change in Price ($\% \Delta P$)

$\% \Delta P = \frac{\text{New Price} - \text{Old Price}}{\text{Old Price}} \times 100$

$\% \Delta P = \frac{750 - 500}{500} \times 100 = \frac{250}{500} \times 100 = 50\%$

Step 3: Calculate PED

$PED = \frac{-25}{50} = -0.5$

The absolute value of PED is:

$|PED| = 0.5$

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b. Is the Demand Elastic or Inelastic?

• Elastic Demand: $|PED| > 1$
• Inelastic Demand: $|PED| < 1$

Since $|PED| = 0.5$, the demand for product X is inelastic.

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Final Answer:

1. Price Elasticity of Demand (PED): $-0.5$ (absolute value = 0.5)
2. Demand Type: Inelastic

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Do you want details or have further questions?
Here are 5 related questions to expand your understanding:

1. How does price elasticity of demand affect a company’s pricing strategy?
2. What happens to total revenue when demand is inelastic, and price increases?
3. How is cross-price elasticity of demand calculated, and when is it used?
4. What are some real-life examples of products with inelastic demand?
5. Can a product’s elasticity change over time?

Tip: Always interpret PED results in the context of the market, considering factors like availability of substitutes and necessity of the product.