(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?

Question

Want to see more full solutions like this?

Answer 1

Textbook Question

Chapter 5, Problem 1.1P

(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?

Expert Solution & Answer

To determine

The price elasticity of demand by using a midpoint formula.

ConceptIntroduction:

Price Elasticity of Demand: It is the degree of responsiveness to change in quantity demanded due to change in price level.

Midpoint formula for measuring the elasticity of demand is given as follows:

$e = \frac{Δ Q}{Δ P} \times [\frac{\frac{P_{1} + P_{2}}{2}}{\frac{Q_{1} + Q_{2}}{2}}]$

Where,

$Δ Q = Q_{2} - Q_{1}$

$Δ P = P_{2} - P_{1}$

Explanation of Solution

We have presented the information in following table:

Price (in $)	Quantity (in units)
$1	50
$0.20	70

By applying the mid-point formula, we get

$e = \frac{20}{0.80} \times [\frac{\frac{1 + 0.20}{2}}{\frac{50 + 70}{2}}]$

On solving the above, we get,

e=0.25

Hence, elasticity of demand using midpoint formula is 0.25

Now, if the elasticity of demand remains constant along the demand curve, then a 10% rise in the price will reduce the quantity demanded. We can calculate the amount of reduction in quantity demanded in following way.

$e= [\frac{% change in quantity demanded}{% change in price}]$

$0 .25= [\frac{% change in quantity demanded}{10%}]$

So, the quantity demanded will decrease by 2.5%

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

not use ai please

Not use ai please

Don't used Ai solution

Answer 2

Textbook Question

Chapter 5, Problem 1.1P

(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?

Expert Solution & Answer

To determine

The price elasticity of demand by using a midpoint formula.

ConceptIntroduction:

Price Elasticity of Demand: It is the degree of responsiveness to change in quantity demanded due to change in price level.

Midpoint formula for measuring the elasticity of demand is given as follows:

$e = \frac{Δ Q}{Δ P} \times [\frac{\frac{P_{1} + P_{2}}{2}}{\frac{Q_{1} + Q_{2}}{2}}]$

Where,

$Δ Q = Q_{2} - Q_{1}$

$Δ P = P_{2} - P_{1}$

Explanation of Solution

We have presented the information in following table:

Price (in $)	Quantity (in units)
$1	50
$0.20	70

By applying the mid-point formula, we get

$e = \frac{20}{0.80} \times [\frac{\frac{1 + 0.20}{2}}{\frac{50 + 70}{2}}]$

On solving the above, we get,

e=0.25

Hence, elasticity of demand using midpoint formula is 0.25

Now, if the elasticity of demand remains constant along the demand curve, then a 10% rise in the price will reduce the quantity demanded. We can calculate the amount of reduction in quantity demanded in following way.

$e= [\frac{% change in quantity demanded}{% change in price}]$

$0 .25= [\frac{% change in quantity demanded}{10%}]$

So, the quantity demanded will decrease by 2.5%

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter 5, Problem 1.1P

(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?

Expert Solution & Answer

To determine

The price elasticity of demand by using a midpoint formula.

ConceptIntroduction:

Price Elasticity of Demand: It is the degree of responsiveness to change in quantity demanded due to change in price level.

Midpoint formula for measuring the elasticity of demand is given as follows:

$e = \frac{Δ Q}{Δ P} \times [\frac{\frac{P_{1} + P_{2}}{2}}{\frac{Q_{1} + Q_{2}}{2}}]$

Where,

$Δ Q = Q_{2} - Q_{1}$

$Δ P = P_{2} - P_{1}$

Explanation of Solution

We have presented the information in following table:

Price (in $)	Quantity (in units)
$1	50
$0.20	70

By applying the mid-point formula, we get

$e = \frac{20}{0.80} \times [\frac{\frac{1 + 0.20}{2}}{\frac{50 + 70}{2}}]$

On solving the above, we get,

e=0.25

Hence, elasticity of demand using midpoint formula is 0.25

Now, if the elasticity of demand remains constant along the demand curve, then a 10% rise in the price will reduce the quantity demanded. We can calculate the amount of reduction in quantity demanded in following way.

$e= [\frac{% change in quantity demanded}{% change in price}]$

$0 .25= [\frac{% change in quantity demanded}{10%}]$

So, the quantity demanded will decrease by 2.5%

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter 5, Problem 1.1P

(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?

Expert Solution & Answer

To determine

The price elasticity of demand by using a midpoint formula.

ConceptIntroduction:

Price Elasticity of Demand: It is the degree of responsiveness to change in quantity demanded due to change in price level.

Midpoint formula for measuring the elasticity of demand is given as follows:

$e = \frac{Δ Q}{Δ P} \times [\frac{\frac{P_{1} + P_{2}}{2}}{\frac{Q_{1} + Q_{2}}{2}}]$

Where,

$Δ Q = Q_{2} - Q_{1}$

$Δ P = P_{2} - P_{1}$

Explanation of Solution

We have presented the information in following table:

Price (in $)	Quantity (in units)
$1	50
$0.20	70

By applying the mid-point formula, we get

$e = \frac{20}{0.80} \times [\frac{\frac{1 + 0.20}{2}}{\frac{50 + 70}{2}}]$

On solving the above, we get,

e=0.25

Hence, elasticity of demand using midpoint formula is 0.25

Now, if the elasticity of demand remains constant along the demand curve, then a 10% rise in the price will reduce the quantity demanded. We can calculate the amount of reduction in quantity demanded in following way.

$e= [\frac{% change in quantity demanded}{% change in price}]$

$0 .25= [\frac{% change in quantity demanded}{10%}]$

So, the quantity demanded will decrease by 2.5%

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

The price elasticity of demand by using a midpoint formula.

ConceptIntroduction:

Price Elasticity of Demand: It is the degree of responsiveness to change in quantity demanded due to change in price level.

Midpoint formula for measuring the elasticity of demand is given as follows:

$e = \frac{Δ Q}{Δ P} \times [\frac{\frac{P_{1} + P_{2}}{2}}{\frac{Q_{1} + Q_{2}}{2}}]$

Where,

$Δ Q = Q_{2} - Q_{1}$

$Δ P = P_{2} - P_{1}$

Explanation of Solution

We have presented the information in following table:

Price (in $)	Quantity (in units)
$1	50
$0.20	70

By applying the mid-point formula, we get

$e = \frac{20}{0.80} \times [\frac{\frac{1 + 0.20}{2}}{\frac{50 + 70}{2}}]$

On solving the above, we get,

e=0.25

Hence, elasticity of demand using midpoint formula is 0.25

Now, if the elasticity of demand remains constant along the demand curve, then a 10% rise in the price will reduce the quantity demanded. We can calculate the amount of reduction in quantity demanded in following way.

$e= [\frac{% change in quantity demanded}{% change in price}]$

$0 .25= [\frac{% change in quantity demanded}{10%}]$

So, the quantity demanded will decrease by 2.5%

Answer 8

Expert Solution & Answer

To determine

The price elasticity of demand by using a midpoint formula.

ConceptIntroduction:

Price Elasticity of Demand: It is the degree of responsiveness to change in quantity demanded due to change in price level.

Midpoint formula for measuring the elasticity of demand is given as follows:

$e = \frac{Δ Q}{Δ P} \times [\frac{\frac{P_{1} + P_{2}}{2}}{\frac{Q_{1} + Q_{2}}{2}}]$

Where,

$Δ Q = Q_{2} - Q_{1}$

$Δ P = P_{2} - P_{1}$

Explanation of Solution

We have presented the information in following table:

Price (in $)	Quantity (in units)
$1	50
$0.20	70

By applying the mid-point formula, we get

$e = \frac{20}{0.80} \times [\frac{\frac{1 + 0.20}{2}}{\frac{50 + 70}{2}}]$

On solving the above, we get,

e=0.25

Hence, elasticity of demand using midpoint formula is 0.25

Now, if the elasticity of demand remains constant along the demand curve, then a 10% rise in the price will reduce the quantity demanded. We can calculate the amount of reduction in quantity demanded in following way.

$e= [\frac{% change in quantity demanded}{% change in price}]$

$0 .25= [\frac{% change in quantity demanded}{10%}]$

So, the quantity demanded will decrease by 2.5%

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

The price elasticity of demand by using a midpoint formula.

ConceptIntroduction:

Price Elasticity of Demand: It is the degree of responsiveness to change in quantity demanded due to change in price level.

Midpoint formula for measuring the elasticity of demand is given as follows:

$e = \frac{Δ Q}{Δ P} \times [\frac{\frac{P_{1} + P_{2}}{2}}{\frac{Q_{1} + Q_{2}}{2}}]$

Where,

$Δ Q = Q_{2} - Q_{1}$

$Δ P = P_{2} - P_{1}$

Answer 12

Explanation of Solution

We have presented the information in following table:

Price (in $)	Quantity (in units)
$1	50
$0.20	70

By applying the mid-point formula, we get

$e = \frac{20}{0.80} \times [\frac{\frac{1 + 0.20}{2}}{\frac{50 + 70}{2}}]$

On solving the above, we get,

e=0.25

Hence, elasticity of demand using midpoint formula is 0.25

Now, if the elasticity of demand remains constant along the demand curve, then a 10% rise in the price will reduce the quantity demanded. We can calculate the amount of reduction in quantity demanded in following way.

$e= [\frac{% change in quantity demanded}{% change in price}]$

$0 .25= [\frac{% change in quantity demanded}{10%}]$

So, the quantity demanded will decrease by 2.5%

Answer 13

Ch. 5 - (Calculating Price Elasticity of Demand) Suppose...Ch. 5 - (Price Elasticity and Total Revenue) Fill in the...Ch. 5 - (Categories of Price Elasticity of Demand) For...Ch. 5 - Prob. 2.4P Ch. 5 - (Determinants of Price Elasticity) Would the price...Ch. 5 - (Price Elasticity of Supply) Calculate the price...Ch. 5 - (Cross-Price Elasticity) Rank the following in...Ch. 5 - Prob. 4.8P Ch. 5 - (Other Elasticity Measures) Complete each of the...

Videos

Explanation of Solution

Want to see more full solutions like this?

Chapter 5 Solutions