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Using the endpoint method, computing the percent change in price from point A to B, computes the percent change in price with 5 as starting value. Using the endpoint method, computing the percent change in price from point A to B, computes the percent change in price with 10 as starting value. O Using the endpoint method, computing the percent change in price from point B to A, computes the percent change in price with 5 as the starting value. | Using the endpoint method, computing the percent change in price from point B to A, computes the percent change in price with 10 as the starting value. Computing the percent change in price from B to A gives a bigger percent change in price than computing the percent change in price from A to B. Computing the percent change in price from A to B gives a bigger percent change in price than computing the percent change in price from B to A. A drawback of using the endpoint method for computing price elasticity is that the calculation yields different values depending on which direction along the demand curve the computations are made. Computing from right to left yields a different number than computing from left to right.

Using the endpoint method, computing the percent change in price from point A to B, computes the percent change in price with 5 as starting value. Using the endpoint method, computing the percent change in price from point A to B, computes the percent change in price with 10 as starting value. O Using the endpoint method, computing the percent change in price from point B to A, computes the percent change in price with 5 as the starting value. | Using the endpoint method, computing the percent change in price from point B to A, computes the percent change in price with 10 as the starting value. Computing the percent change in price from B to A gives a bigger percent change in price than computing the percent change in price from A to B. Computing the percent change in price from A to B gives a bigger percent change in price than computing the percent change in price from B to A. A drawback of using the endpoint method for computing price elasticity is that the calculation yields different values depending on which direction along the demand curve the computations are made. Computing from right to left yields a different number than computing from left to right.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Understanding Price Elasticity Using the Endpoint Method In economics, the endpoint method is used to calculate the percentage change in price, which is a fundamental step in understanding price elasticity. There are several factors to consider when using this method: 1. **Endpoint Method Calculation Example 1** - Using the endpoint method, computing the percent change in price from point A to B, computes the percent change in price with 5 as the starting value. 2. **Endpoint Method Calculation Example 2** - Using the endpoint method, computing the percent change in price from point A to B, computes the percent change in price with 10 as the starting value. 3. **Endpoint Method Calculation Example 3** - Using the endpoint method, computing the percent change in price from point B to A, computes the percent change in price with 5 as the starting value. 4. **Endpoint Method Calculation Example 4** - Using the endpoint method, computing the percent change in price from point B to A, computes the percent change in price with 10 as the starting value. 5. **Directional Difference in Percentage Calculation** - Computing the percent change in price from B to A gives a bigger percent change in price than computing the percent change in price from A to B. 6. **Directional Difference in Percentage Calculation (Reversed)** - Computing the percent change in price from A to B gives a bigger percent change in price than computing the percent change in price from B to A. 7. **Drawback of Endpoint Method** - A drawback of using the endpoint method for computing price elasticity is that the calculation yields different values depending on which direction along the demand curve the computations are made. Computing from right to left yields a different number than computing from left to right. By understanding these points, one can better interpret and analyze the changes in price and their impact on demand, ultimately leading to more accurate economic predictions and decisions.
Transcribed Image Text:### Understanding Price Elasticity Using the Endpoint Method In economics, the endpoint method is used to calculate the percentage change in price, which is a fundamental step in understanding price elasticity. There are several factors to consider when using this method: 1. **Endpoint Method Calculation Example 1** - Using the endpoint method, computing the percent change in price from point A to B, computes the percent change in price with 5 as the starting value. 2. **Endpoint Method Calculation Example 2** - Using the endpoint method, computing the percent change in price from point A to B, computes the percent change in price with 10 as the starting value. 3. **Endpoint Method Calculation Example 3** - Using the endpoint method, computing the percent change in price from point B to A, computes the percent change in price with 5 as the starting value. 4. **Endpoint Method Calculation Example 4** - Using the endpoint method, computing the percent change in price from point B to A, computes the percent change in price with 10 as the starting value. 5. **Directional Difference in Percentage Calculation** - Computing the percent change in price from B to A gives a bigger percent change in price than computing the percent change in price from A to B. 6. **Directional Difference in Percentage Calculation (Reversed)** - Computing the percent change in price from A to B gives a bigger percent change in price than computing the percent change in price from B to A. 7. **Drawback of Endpoint Method** - A drawback of using the endpoint method for computing price elasticity is that the calculation yields different values depending on which direction along the demand curve the computations are made. Computing from right to left yields a different number than computing from left to right. By understanding these points, one can better interpret and analyze the changes in price and their impact on demand, ultimately leading to more accurate economic predictions and decisions.
### Understanding Elasticity: Endpoint Method The endpoint method of computing elasticity calculates the percentage change as a percentage of the starting value for each variable. #### Explanation of the Graph The graph depicted is a standard supply and demand graph with labeled axes: - **Vertical axis (P)**: Represents the price level of a good or service. - **Horizontal axis (Q)**: Represents the quantity of the good or service. Two demand curves are shown: 1. **D1 (Blue curve)**: The initial demand curve. 2. **D2 (Red curve)**: The new demand curve after a shift in demand. **Key Points on the Graph:** - **A**: Intersection of the initial demand curve (D1) and the supply curve at the price of $5 and quantity of 100. - **B**: Intersection at price $5 and quantity 80 on the shifted demand curve (D2). - **C**: Intersection at price $10 and quantity 90 on the shifted demand curve (D2). #### Detailed Breakdown: 1. **Original Equilibrium (Point A):** - Price (P) = $5 - Quantity (Q) = 100 2. **New Equilibrium after Demand Shift (Point C):** - Price (P) = $10 - Quantity (Q) = 90 3. **Point B:** - Price (P) = $5 - Quantity (Q) = 80 ### Understanding the Endpoint Method - The endpoint method calculates the elasticity by using the starting values of the variables (price and quantity) and comparing them to the endpoint values after the change. - This method is useful in understanding how sensitive the quantity demanded or supplied is to price changes. The graph helps visualize how the quantities and prices change and intersect under different demands, thus providing a clear representation of the elasticity using the endpoint method.
Transcribed Image Text:### Understanding Elasticity: Endpoint Method The endpoint method of computing elasticity calculates the percentage change as a percentage of the starting value for each variable. #### Explanation of the Graph The graph depicted is a standard supply and demand graph with labeled axes: - **Vertical axis (P)**: Represents the price level of a good or service. - **Horizontal axis (Q)**: Represents the quantity of the good or service. Two demand curves are shown: 1. **D1 (Blue curve)**: The initial demand curve. 2. **D2 (Red curve)**: The new demand curve after a shift in demand. **Key Points on the Graph:** - **A**: Intersection of the initial demand curve (D1) and the supply curve at the price of $5 and quantity of 100. - **B**: Intersection at price $5 and quantity 80 on the shifted demand curve (D2). - **C**: Intersection at price $10 and quantity 90 on the shifted demand curve (D2). #### Detailed Breakdown: 1. **Original Equilibrium (Point A):** - Price (P) = $5 - Quantity (Q) = 100 2. **New Equilibrium after Demand Shift (Point C):** - Price (P) = $10 - Quantity (Q) = 90 3. **Point B:** - Price (P) = $5 - Quantity (Q) = 80 ### Understanding the Endpoint Method - The endpoint method calculates the elasticity by using the starting values of the variables (price and quantity) and comparing them to the endpoint values after the change. - This method is useful in understanding how sensitive the quantity demanded or supplied is to price changes. The graph helps visualize how the quantities and prices change and intersect under different demands, thus providing a clear representation of the elasticity using the endpoint method.
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