Asked by karleigh rivas on Jul 09, 2024
Verified
Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger decreases from $9 to $8, the price elasticity of demand equals ________ and demand is ________.
A) 6.33; elastic
B) -0.16; inelastic
C) -6.33; elastic
D) -19.0; inelastic
Price Elasticity
A parameter that quantifies the change in demand for a commodity in response to its price alterations.
Midpoint Formula
A mathematical method used to find the midpoint or average between two points, often used in economics to calculate price or quantity averages.
- Derive the price elasticity of demand through the implementation of the midpoint formula.
- Classify the segment of the demand curve representing various elasticity states (elastic, inelastic, unit elastic).
Verified Answer
AK
Aaron KliamovichJul 10, 2024
Final Answer :
C
Explanation :
The price elasticity of demand is calculated using the midpoint formula, which is [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Without the specific quantities (Q1 and Q2), we can't calculate the exact number, but the negative sign in the answer indicates a decrease in quantity demanded due to an increase in price, which is a characteristic of the law of demand. The term "elastic" suggests that the percentage change in quantity demanded is greater than the percentage change in price, which matches with a high absolute value of elasticity (greater than 1).
Learning Objectives
- Derive the price elasticity of demand through the implementation of the midpoint formula.
- Classify the segment of the demand curve representing various elasticity states (elastic, inelastic, unit elastic).