Asked by Tanner Lloyd on May 30, 2024
Verified
When the price of candy bars is $1.10, the quantity demanded is 340 per day. When the price falls to $0.90, the quantity demanded increases to 350. Given this information and using the midpoint method, we know that the demand for candy bars is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly inelastic.
Demand
The volume of goods or services that shoppers are prepared and financially able to buy at several price points within a particular period.
Midpoint Method
A technique used in economics to calculate the elasticity of demand or supply, using the average of the initial and final quantities and prices to determine the percentage change.
Inelastic
Refers to a scenario in which the demand or supply for a product or service is relatively insensitive to price fluctuations.
- Recognize the attributes of demand elasticity, covering both inelastic and elastic demand scenarios.
- Implement the midpoint approach for determining various elasticity measures, including demand's price elasticity, demand's income elasticity, and cross-price elasticity.
Verified Answer
ZK
Zybrea KnightJun 05, 2024
Final Answer :
A
Explanation :
The midpoint method for elasticity is calculated as [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Plugging in the given numbers: [(350 - 340) / (350 + 340)/2] / [($0.90 - $1.10) / ($0.90 + $1.10)/2] = 10/345 / -0.20/1 = -0.058 / -0.20 = 0.29, which is less than 1, indicating inelastic demand.
Learning Objectives
- Recognize the attributes of demand elasticity, covering both inelastic and elastic demand scenarios.
- Implement the midpoint approach for determining various elasticity measures, including demand's price elasticity, demand's income elasticity, and cross-price elasticity.