Explanation From the given data, the price has changed from $3.42 to $4.26 in one year. Thus, the average price is Therefore, the percentage change in the price as per mid-point method is Similarly, the quantity demanded changed from 2.2 billion to 2 billion in one year. The average quantity is billion Therefore, the percentage change in the quantity demanded as per the mid-point method is (0.2)/ 2.1 = 0.095 Thus, the elasticity of price of wheat is

The price elasticity of demand of wheat using the midpoint method. Total revenue for farmers in 2014 and 2015. Whether the bad harvest increased or decreased the total revenue of wheat farmers. How can that be predicted from the Explanation to part a? Concept Introduction: Price Elasticity of Demand: Price elasticity of demand refers to the percentage change in the quantity demanded in response to percentage change in the price. Mid-Point Method of Calculation: Usually percentage change in a variable X is calculated by (New value of X − Old value of X)/ Old value of X. In mid-point method, the percentage change is calculated as (New value of X − Old value of X) / Average value of X.

Microeconomics

5th Edition

ISBN: 9781319098780

Author: Paul Krugman, Robin Wells

Publisher: Worth Publishers

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Normal and Inferior Goods

Understanding a normal good and an inferior good is important because it tells us what will happen to demand different products during booms and recessions.

Question

Chapter 6, Problem 2P

To determine

The price elasticity of demand of wheat using the midpoint method.

Total revenue for farmers in 2014 and 2015.

Whether the bad harvest increased or decreased the total revenue of wheat farmers. How can that be predicted from the Explanation to part a?

Concept Introduction:

Price Elasticity of Demand:

Price elasticity of demand refers to the percentage change in the quantity demanded in response to percentage change in the price.

Mid-Point Method of Calculation:

Usually percentage change in a variable X is calculated by (New value of X − Old value of X)/ Old value of X. In mid-point method, the percentage change is calculated as (New value of X − Old value of X) / Average value of X.

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