Question

6. The following question has four (4) parts. a. Please dofin be t alt Fease define briefly but accurately the term PRICE ELASTIC DEMAND: b. What is the MIDPOINT FORMULA for Price Elasticity of Demand C. Please apply the following data to the midpoint Formula for the Price Elasticity of Demand. In 2014, Figueira Sports produced 20,000 baseballs for the Philadelphia Phillies farm teams. In 2016, Figueira Sports produced 30,000 baseballs for the Philadelphia Phillies farm teams. The price per baseball in 2014 was $10.00 per ball. The price for a ball in 2016 was $15.00 per ball. The reasoning for the increase in production and the increase in cost is not germane to this question. The question: Please calculate Ed. (Please show all your work for partial credit.) d. Is the Ed that you calculated reflective of elasticity, inelasticity, or unity elasticity? Uəbuvubupu

Answer 1

Ahect a) Define price elasticity of demand. Price elasticity of demand is a measure to show the responsiveness of demand of a good with respect to its price. It shows that what happens to the demand of a good oner price of that good changes, everything else that can demand remain unchanged. Formula Ed 3 % change in Quantity demond % change in price Ed = Qi - Q0 x 200 Qo Pi-Po x 400 Po where Qı - New quontity demand Pls New price Qo → Old Quantity demanded Do ~ Old price Ed < 1 = indlastic tim e and 7 ettese solo demand and er Ed lose & Ed> 1 = elastic demand Ed = 1 =unitasky elastic demand

72 b) Midpoint formul for price elasticity of demana PED = Qi Qo x100 Aug (Qi+Qo) 2 & Pi-Po x 100 Aug (Pit Pa) The advantage of this formula is that, we obtain same results between two points on a cure, regardless of the direction. - 2 c) Curen information, we have Qo = 20,000 di = 30,000 . | Po = $10 Pi = $15 PED - Xtoo Q-QO Q700 2 PI-Po xtoo Pitpo 30,000 - 20,000 ( 30,000+ 20.000) 15-10 15tlo 10,000 (50,000)

PED = 10,888X2 50,00 Ø $X2 183 PED = = 3 = 0.6 d) since, elasticity is 0.6 which is less than I, we can say the demand of baseball is relatively inelastic.