Between 2010 and 2015 the average price of tea in the UK increased from £7.20 per kilo to £8.48 per kilo. Over the same period the quantity of tea purchased fell from 97 million kilos to 76 million kilos. Find the price elasticity of demand
price elasiticy of demand is determined by the percentage change in quantity demanded divided by the percentage change in the price of a good. Therefore, to find the elasticity of demand, you must find the percentage change of the quantity demand, 97 million kilos to 76 million kilos, which is a fall of 21.6% and the percentage change of price, £7.20 to £8.48, which is an increase of 17.8%. With these two figures we can now calculate the price elasticity of demand by putting them into the equation. Thereby finding the P.E.D to be -21.6/17.8 = -1.2
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