Question

15. Refer to the accompanying table, calculate the price elasticity of demand for erasers if the price of erasers decreases from $2.5 to $1 using the midpoint method.

8:31 CH Th 6 30 thg 7 @ 88% Calibri Regular (T 11 в ц А. 4 15. Refer to the accompanying table, calculate the price elasticity of demand for erasers if the nrice of eracers decreases from $2 5 to $1 using the midpoint method. Price of Quantity Demanded Quantity Demanded Erasers of Erasers of Pencils S.50 10 12 $1.00 11 $1.50 7 10 $2.00 6 $2.50 8 9 5 16. Consider the following table. Suppose quantity supplied increases by 30 for every pric level. Find the new equilibrium price. Quantity Quantity Price Demanded Supplied

Answer 1

The price elasticity of demand can be measured using the following formula

$\large E = \frac{\% \triangle Q}{\% \triangle P}$

Applying mid-point method

$\large \implies E = \frac{\frac{Q_2-Q_1}{\frac{Q_2+Q_1}{2}}\times 100}{\frac{P_2-P_1}{\frac{P_2+P_1}{2}}\times 100}$

On simplifying the above equation we get

E= (Q2 – Q1)(P2 + P1) (Q2 + Q1)(P2 - P1)

Given, P1 = $ 2.50, Q1 = 5

and P2 = $ 1, Q2 = 8

Plug in these values in the above equation we get

$\large \implies E = \frac{(8-5)(1+2.5)}{(8+5)(1-2.5)}$

$\large \implies E = \frac{3 \times 3.5}{13 \times (-1.5)}$

$\large \implies E \approx - 0.5385 \: (Inelastic)$

Price elasticity of demand for erasers = - 0.5385

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