The following graph shows the demand for a good. For each of the regions, use th
ID: 1255610 • Letter: T
Question
The following graph shows the demand for a good.
For each of the regions, use the midpoint method to identify whether the demand for this good is elastic, (approximately) unit elastic, or inelastic.
Region
Elastic
Inelastic
Unit Elastic
True or False:
The value of the price elasticity of demand is not equal to the slope of the demand curve.
Region
Elastic
Inelastic
Unit Elastic
Between Y and Z ----------- ---------- ---------------- Between W andX ------ ---------------- Between X and Y -- -- 140 Demand QUANTITY (Units)Explanation / Answer
Between Y and Z Original Price: 70 New price: 20 Change in price: -50 Average price: 45 % Change in Price: -50 /45 = -111.11% Original demand: 45 New demand: 70 Change in demand: 25 Average demand: 57.5 % Change in demand: 25/57.5 = 43.48% Proce elasticity : % Change in demand/ % change ein price 43.48% /111.11% = -0.39 Inelastic between Y and Z Between W and X Original Price:140 New price: 90 Change in price: -50 Average price: 115 % Change in price: -50 /115 = -43.48% original demand: 10 New demand: 35 Change in demand: 25 Average demand: 22.50 % Change in demand: 25/22.5 = 111.11% Price elasticity: 111.11 /43.48 % = -2.56 Elastic between W and X Point X and Y Original price: 90 New price: 70 Change in price: -20 Averagae price: 80 % change in price: 25% Orginal demand: 35 New demand: 45 Change in demand: 10 % change in demand: 25% Price elastivity of demand: 25% /25% = 1 Unit elastic at X and Y False, the value of price elasticity of demand is equal to slope of demnd curve.
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