| i Secure l https: htmi here on the K Back This window shows your responses and

Question

| i Secure l https: htmi here on the K Back This window shows your responses and what was marked correct and incorrect from Dan recent venture is selling homemade brownies that he bakes himself. At a price of $2.5 each, he sells 250. At a price of $2 each, he sells 300. ny "Dimes" Donahue is a neighborhood's 9-year-old entrepreneur. His most e structions: Use the midpoint method and round your answer to 2 decimal places. Do not include a minus sign a. What is the elasticity of demand? 4.50 8 b. Is demand elastic or inelastic over this price range? Inelastic

Explanation / Answer

a) Elasticity of demand (Ed) = (Q/P)*[(P1+P2)/(Q1+Q2)]

Ed = (250 – 300)/(2.5 – 2) *[4.5/550]

= -(50/0.5)*(4.5/550)

Ed = -0.82

b) The demand is inelastic as the absolute value of the elasticity is less than 1

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