Let the Market Demand for Rye Bread Be Given by Q

Let the market demand for rye bread be given by Q = 500 + I - 250P_rye + 400P_wheat,where Q is monthly demand in number of loaves,I is average monthly income in dollars,P_rye is the price of a loaf of rye bread,and P_wheat is the price of a loaf of wheat bread.If I = $1,000,P_rye = $2,and P_wheat = $3,calculate the following (based on 10% changes in denominators):

A)the arc price elasticity of demand for rye bread

Correct Answer:

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Q = 500 + 1,000 - 250 (2)+ 400(3)= 2,200...

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