Answer :
The price elasticity of the demand for meat is -0.4. This indicates that the demand for meat is relatively responsive to changes in price.
The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price.
To calculate it, we use the formula:
Elasticity = (% change in quantity demanded) / (% change in price)
In this case, the initial price is $8, and 50 kilos are consumed. When the price rises to $10, 45 kilos are consumed.
The percentage change in quantity demanded is calculated as: (45 - 50) / 50 * 100 = -10% The percentage change in price is calculated as: (10 - 8) / 8 * 100 = 25%
Now we can plug these values into the elasticity formula: Elasticity = (-10%) / (25%) = -0.4
Since the elasticity is negative, we can conclude that the demand for meat is elastic.
This means that a 1% increase in price leads to a 0.4% decrease in quantity demanded.
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