The quantity demanded of good X is 300 units when the price of good X is $50, and the quantity demanded of good X is 250 units when the price of good > is $60. What is the numerical value of arc price elasticity of demand for good X?

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The quantity demanded of good X is 300 units when the price of good X is $50, and the quantity demanded of good X is 250 units when the price of good X
is $60. What is the numerical value of arc price elasticity of demand for good X?
Transcribed Image Text:The quantity demanded of good X is 300 units when the price of good X is $50, and the quantity demanded of good X is 250 units when the price of good X is $60. What is the numerical value of arc price elasticity of demand for good X?
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Step 1
      Arc elasticity measures elasticity at the midpoint between the two selected points

Arc Ed= [(Qd2  Qd1) / midpoint Qd][(P2  P1) / midpoint P]Midpoint Qd = (Qd1 + Qd2) / 2                                     =300+250/2                                                               =275                    Midpoint Price = (P1 + P2) / 2                           =(50+60)/2                                 =55                 % change in qty demanded =[(Qd2  Qd1) / midpoint Qd]                                                   =(250-300)/275                                                   =-0.19                       % change in price                  =[(P2  P1) / midpoint P]                                                   =(60-50)/55                                                   =0.19                     Arc Ed = -0.19/0.19                                   = -1Economics homework question answer, step 1, image 1

 

 

 

 

 

 

 

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