The price elasticity of demand is -0.33 and it is price inelastic.
Since the price function is given as:
P = 20 - 5Q
where, P = 5
Then the quantity will go thus:
P = 20 - 5Q
5 = 20 - 5Q
5 - 20 = - 5Q
-15 = -5Q
Q = -15/-5.
Q = 3
The price elasticity of demand will be:
dQ/dP × P/Q = -1/5 × 5/3 = -1/3 = -0.33
In conclusion, the price elasticity of demand is -0.33.
In this case, the demand is said to be price inelastic since the price elasticity of demand is less than 1.
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