<p>Yes, the answer is -0.8.</p>

<p>Price Elasticity of Demand is defined as:
$$e_{\langle p \rangle} = \frac{\mathrm{d} Q/Q}{\mathrm{d} P/P}$$</p>

<p>You're given :
$$\mathrm{d} Q/Q = -0.08$$
and 
$$\mathrm{d} P/P = 0.1$$</p>

<p>ergo:
$$-0.08/0.1 = -0.8$$</p>

<p>I'm reasonably certain that by "Interpret your answer," your professor means that s/he wants you to explain what that number means, in layman's terms.</p>

<p>You can always check the <a href="https://en.wikipedia.org/wiki/Price_elasticity_of_demand" rel="nofollow">Wikipedia entry</a>.</p>

CC BY-SA 3.0
2016-04-25T08:19:21.163Z
2016-04-25T19:37:48.223Z
2016-04-25T19:37:48.223Z
T-Moar
<p>Suppose that house prices increase by 10%, and the total quantity of homes purchased
decreases by 8%. What is the elasticity of demand of housing? Interpret your answer in the
context of a 1% change in home prices?</p>

<p>Is the answer just -0.8? Can someone explain this please, my professor really sucks. </p>

<microeconomics><elasticity>
Calculate Elasticity of demand in this example
user8077
# Calculate Elasticity of demand in this example

(Asked by: username_0 on 2016-04-25)

Suppose that house prices increase by 10%, and the total quantity of homes purchased
decreases by 8%. What is the elasticity of demand of housing? Interpret your answer in the
context of a 1% change in home prices?

Is the answer just -0.8? Can someone explain this please, my professor really sucks.

**Tags:** microeconomics, elasticity


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## 1 answers

### Answer by username_1 on 2016-04-25. Score: 2

Yes, the answer is -0.8.

Price Elasticity of Demand is defined as:
$$e\_{\langle p \rangle} = \frac{\mathrm{d} Q/Q}{\mathrm{d} P/P}$$

You're given :
$$\mathrm{d} Q/Q = -0.08$$
and
$$\mathrm{d} P/P = 0.1$$

ergo:
$$-0.08/0.1 = -0.8$$

I'm reasonably certain that by "Interpret your answer," your professor means that s/he wants you to explain what that number means, in layman's terms.

You can always check the [Wikipedia entry](https://en.wikipedia.org/wiki/Price_elasticity_of_demand).


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