The 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. Calculate the price elasticity of demand for tea.
Price elasticity of demand = change in demand / change in price change in price = 7.20 --> 8.48 = 17.78% increasechange in demand = 97 million --> 76 million kilos = 21.6% decrease therefore PED = -21.6/+17.78 = -1.217 = -1.22
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