Question

GroMo sells boxes of tulip bulbs. The graph of the elasticity function is shown below. 10 a. At what price is the elasticity of demand unitary? S b. Reading from the graph, we see that E(800) demand change? 2. If the price increases 2 % from $8.00, how will the Demand will Select an answerby approximatelySelect an answer

Answer 1

$\text{Solution:}$

$\text{a)}$

$\text{According to the graph, }E(6)=1\text{ hence at p=6 the elasticity is 1}$

$\text{b)}$

$\Delta Q=\frac{\mathrm{d} q}{\mathrm{d} p}\Delta P$

$\Delta Q|_{p=8}=2\left ( 8+0.02*8-8 \right )$

$\Delta Q|_{p=8}= 0.32$