Suppose that the following equation characterizes the demand for primary education in a developing country X:
Q = 100 – 2P
Where Q is quantity demanded in years of schooling and P is the cost of schooling in dollars.
A. Please draw this demand curve.
B. Suppose that the price of schooling is $20 per year of schooling and it suddenly rises to $40. Compute the point price elasticity of demand at the initial price level and at the final price level.
C. Continuing with the price change in the last question, please compute the arch price elasticity of demand. According to this calculation, is the demand elastic or inelastic?