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Econometrics

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Elasticity Inferences from an Exponent Estimate

EMETRC-4X63GV

Suppose that the demand function for textbooks is, $Q = 10P^{-0.5}$.

Determine the own-price elasticity of demand.

A

$\varepsilon_D = -5P^{-1.5}$

B

$\varepsilon_D = -0.5$

C

$\varepsilon_D = 0.5$

D

$\varepsilon_D = -\cfrac{1}{2P}$

E

$\varepsilon_D = -1$