Use the midpoints formula to compute the elasticity given the following price, q
ID: 1167428 • Letter: U
Question
Use the midpoints formula to compute the elasticity given the following price, quantity combinations:
If Price of surgery = $10,000, 10 patients will be willing to undergo it
If Price of surgery = $19,000, 4 patients will be willing to undergo it
round off your answer to 2 decimal places.
- 1.00
- 1.38
- 13.8
- 0.138
none of the above
2)
How do you describe the elasticity in the previous question?
elastic
inelastic
unitary elastic
cannot tell
3)
When abdominoplasty costs were $6,000, Dr. Hurwitz treated 300 patients. When they dropped the price to $5,000, customers increased to 400.
What is the elasticity of demand for abdominoplasty using arc elasticity or the midpoints formula (rounded-off to 2 decimal places)?
- 1.38
- 1.57
- 0.157
cannot tell
none of the above
4)
UESTION 8
Did the drop in price in the previous question increase revenue?
yes
no
revenue stayed the same
cannot tell
none of the above
1)Use the midpoints formula to compute the elasticity given the following price, quantity combinations:
If Price of surgery = $10,000, 10 patients will be willing to undergo it
If Price of surgery = $19,000, 4 patients will be willing to undergo it
Explanation / Answer
Ans)
midpoint percentage change is given as (Xnew - Xold) / Xaverage
The percentage change in price, as calculated by the midpoint formula would be
= ($19,000 - $10,000) / $14500 = 0.62069
The percentage change in quantity, as calculated by the midpoint formula would be
= ( 4 – 10 )/7 = - 0.8571
Thus, coefficient of elasticity, by the midpoint formula is = - 0.8571 / 0.62069 = -1.3808
Thus, answer is (b) = -1.38
2) As the elasticity lies between
- infinity < E < -1, thus the demand is elastic.
Hence, answer is (a) elastic.
3)
midpoint percentage change is given as (Xnew - Xold) / Xaverage
The percentage change in price, as calculated by the midpoint formula would be
= ($5000 - $6000) / $5500 = - 0.181818
The percentage change in quantity, as calculated by the midpoint formula would be
= ( 400 – 300 )/350 = 0.2857
Thus, coefficient of elasticity, by the midpoint formula is = 0.2857/ - 0.181818= -1.58125
Thus, answer is (b) as approx = -1.57.
4)
When abdominoplasty costs were $6,000 and 300 patients were treated the revenue is
R1 = $6,000*300 = $1800000
When the price dropped to $5,000 and customers increased to 400, the revenue became
R2 = $5,000*400 = $2000000
Thus, the drop in price increased the revenue.
Hence, answer is (a)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.