Answer:
-1.67
Explanation:
Given that,
Q = 120 - 1.25p
Initial price, p = $60 per unit
Initial quantity, q = 45 units
Q = 120 - 1.25p
Now, differentiating Q with respect to price,
dQ/dp = -1.25
Therefore,
Price elasticity of demand:
= (dQ/dp) × (p ÷ q)
= -1.25 × (60 ÷ 45)
= -1.25 × 1.33
= -1.67
This means that the demand is elastic.
