Question

Figure 5-3 10 Demand 246 8 10 12 14 16 18 20 22 24 26 ity 10. Refer to Figure 5-3, a) Using the midpoint method what is the clalsticity of demand between point A and point B? b) Between point A and point B is demand elastic or inelastic?

Answer 1

$\large Elasticity, = \frac{\% \triangle Q}{\% \triangle P}$

$\large \% \triangle Q= \frac{Q_2-Q_1}{\frac{Q_2+Q_1}{2}}*100$

$\large \large \% \triangle Q= \frac{20-12}{\frac{20+12}{2}}*100$

$\large \% \triangle Q= \frac{8}{16}*100$

$\large \% \triangle Q= \frac{1}{2}*100 = 50\%$

Similarly we can solve the pricing

$\large \% \triangle P= \frac{P_2-P_1}{\frac{P_2+P_1}{2}}*100$

$\large \% \triangle P= \frac{5-7}{\frac{5+7}{2}}*100$

$\large \% \triangle P= \frac{-2}{\frac{12}{2}}*100$

$\large \% \triangle P= \frac{-2}{6}*100$

$\large \% \triangle P=-33.33 \%$

$\large Elasticity, = \frac{\% \triangle Q}{\% \triangle P}$

$\large Elasticity, = \frac{50}{-33.33} = -1.50$

Since greater than 1 hence price elastic.

A. Elasticity = - 1.50

B. The demand for the product is elastic.

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2-Q 100 2 100

20 12 - 8+12_ * 100

2100 /0

P2P10 PP 100