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Numbers and Graphs: Elasticity (Ch 06) 5. Working with Numbers and Graphs Q5 Consider the two demand curves in the following
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Answer #1

The formula for price elasticity of demand is = Percentage change in quantity demanded / Percentage change in price.

Between prices 10 and 12,

The price elasticity of demand on D1:

Percentage change in quantity demanded = (14 - 12)/12 * 100 = 16.67%

Percentage change in price = (12 - 10)/10 * 100 = 20%

So price elasticity of demand = 16.67% / 20% = 0.83

The price elasticity of demand on D2:

Percentage change in quantity demanded = (14 - 8)/8 * 100 = 75%

Percentage change in price = (12 - 10)/10 * 100 = 20%

So, price elasticity of demand = 75% / 20% = 3.75

Answer:

Between the two prices 10 and 12, the price elasticity of demand is 0.83 on demand curve D1 and 3.75 on demand curve D2.

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