# Homework Question - Price Floor / Elasticity of Demand

I'm currently taking undergrad microeconomics and came across the following question:

The current price floor in the agricultural lettuce market makes it such that price of lettuce is 25% higher than equilibrium price and 100 heads of lettuce are demanded. Assuming that the elasticity of demand for lettuce is -0.50, what would be the equilibrium price and quantity of lettuce if the government removed the current price floor?

Here's how I've tried to solve the question: https://imgur.com/gallery/blUjgcu .

Price = \$0.75, Quantity = 112.5.

but I don't know how to solve that.

Thanks

• you should add the attempt from that external site to your question in order to make it self contained.
– 1muflon1
Feb 8 '21 at 22:28

Price elasticity of demand of $$-0.5$$ means that if price increases by $$1\%$$ demand decreases by $$0.5\%$$ (and vice versa in case of decrease).
Consequently, if the equilibrium quantity with floor is $$100$$ and the price of lettuce is $$25\%$$ that means that eliminating the price flow - which will offset the $$25\%$$ will increase the quantity demanded by:
$$0.5\cdot25\% = 12.5\%$$
$$12.5\%$$ increase from $$100$$ is $$112.5$$ so that will be new quantity.
Regarding the price you don't mention what the price at the price floor originally was but it should decrease by $$25\%$$ from its original value.