Discussion
What is the point elasticity when price is 12 rupees for the demand function P = 60 − 3q.
Answer: C
The point elasticity is − 0.25.
At \(P = 12\): \(12 = 60 - 3q\), so \(q = 16\). From \(P = 60 - 3q\), \(q = 20 - \frac{P}{3}\) and \(\frac{dq}{dP} = -\frac{1}{3}\).
\[ \begin{aligned} e &= \frac{dq}{dP} \cdot \frac{P}{q} \\ &= -\frac{1}{3} \times \frac{12}{16} = -0.25 \end{aligned} \]
Demand is inelastic at this price. The option 0.25 is the same figure without the minus sign that a downward-sloping demand curve gives.
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