Question

Question 1 Presented below is the table related to box of envelopes price and quantity demanded: Box Of Envelopes Price Quantity Demanded 3$ 500 3.50 $ 450 5$ 300 6 $ 250 a) Calculate the Mid-Point of Quantity and the Mid-Point of Price when price increases from 5$ to 6$. (40 points) (10 points for calculation, 10 points for correct answer) b) Calculate the Price Elasticity of Demand using the Mid-Point Method. (20 points) (10 points for calculation, 10 points for correct answer) c) Is Demand for envelopes Elastic, Unit Elastic or Inelastic? Explain why. (10 points)

Answer 1

Q-1 :: ANSWER ::

=> Explanation :

(1) Mid-Point Quantity = Q2 - Q1/Q2 + Q1/2

= 250-300/250+300/2

= 50/550/2

= 18%

(2) Mid Point Price = P2 - P1/P2 + P1/2

= 6 - 5/ 6 + 5 / 2

= 1/11/2

= 18%

(B) ANSWER ::

=>Price Elasticity Of Demand by Mid Point Formula ::

Elasticity Of Demand = Percentage Change In Quantity/Percentage Change In Price

= 18%/18%

= 1

(C) ANSWER :::

Price Elasticity Of Demand Is 1 It Meas Unit Elastic. So A Rise In Price Nothing Cause To the Seller Of Revenue. At The Price Of $5 And $6 Revenue For seller Is Equal To $1500 In Both Price So Price Elasticity Is Perfectly Elastic