The following graph shows two known points (X and Y) on a demand curve for tomatoes.

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The following graph shows two known points (X and Y) on a demand curve for tomatoes.

3. Using the midpoint method

According to the midpoint method, the price elasticity of demand for tomatoes between point X and point Y is approximately _______ , which suggests that the demand for tomatoes is _______ between points X and Y.

1.2.

business economics

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Answer 1

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Answer #1

Question 1). Answer :- Price elasticity of demand = 0.37

Explanation :- Price elasticity of demand = % Change in quantity demanded / % Change in price.

% Change in quantity demanded = (90 - 70) / [ (90 + 70) / 2 ]

= 20 / (160 / 2)

= 20 / 80

= 0.25

% Change in price = (2 - 1) / [ (2 + 1) / 2 ]

= 1 / (3 / 2)

= 1 / 1.5

= 0.6667 (approx).

Accordingly, Price elasticity of demand = 0.25 / 0.6667 = 0.37 (approx).

Question 2). Answer :- Inelastic demand.

Explanation :- Demand for tomatoes in the given question is inelastic because the Price elasticity of demand for the tomatoes, being, 0.37 is less than 1.

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Answer 2

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