Class 5. Q.10

An important concept in economics is the concept of elasticity of demand. The elasticity of demand of a demand function x=f(p) at a price p is given by $E(p)= -p\frac{f^{\prime}(p)}{f(p)}$. Consider the demand equation p=-0.02x+400 which describes the relationship between the unit price in dollars and the quantity demanded x of a popular brand of home theater systems.

(a)

Find the elasticity of demand E(p)

(b)

Compute E(100) and E(300)