Asked by Tonii White on Apr 29, 2024
Verified
Using the midpoint method, compute the elasticity of demand between points A and B. Is demand along this portion of the curve elastic or inelastic? Interpret your answer with regard to price and quantity demanded. Now compute the elasticity of demand between points B and C. Is demand along this portion of the curve elastic or inelastic?
Elasticity of Demand
A gauge of the responsiveness of the amount of a product consumers want to buy to shifts in its price, evidencing how changes in cost affect demand.
Midpoint Method
A technique used in economics to calculate the elasticity of demand or supply, offering an average percentage change between two points to minimize bias.
Elastic
A term describing the responsiveness of the quantity demanded or supplied of a product when its price changes.
- Adopt the midpoint mechanism to assess various versions of elasticity, namely price elasticity of demand, income elasticity of demand, and cross-price elasticity.
Verified Answer
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Sandile NokuthulaMay 01, 2024
Final Answer :
In the section of the demand curve from A to B, the elasticity of demand would be 2.5. This would be an elastic portion of the curve. This would mean that for every 1 percent change in price, quantity demanded would change by 2.5 percent.
In the section of the demand curve from B to C, the elasticity of demand would be .75. This would be an inelastic portion of the curve. This would mean that for every 1 percent change in price, quantity demanded would change by 0.75 percent.
In the section of the demand curve from B to C, the elasticity of demand would be .75. This would be an inelastic portion of the curve. This would mean that for every 1 percent change in price, quantity demanded would change by 0.75 percent.
Learning Objectives
- Adopt the midpoint mechanism to assess various versions of elasticity, namely price elasticity of demand, income elasticity of demand, and cross-price elasticity.