Consider the demand curve AC of a good in Figure 1. Given distance AB and BC as x and y, respectively, (i) What will be the price elasticity of demand for the good at point B? What will be the price elasticity of demand for the good at point A and at point C?
Answers
Answer:
Explanation:
Finding the Price Elasticity of Demand
Calculate the price elasticity of demand using the data in Figure 1 for an increase in price . Has the elasticity increased or decreased?
Step 1. We know that:
Price Elasticity of Demand = % change in quantity / % change in price
Step 2. From the Midpoint Formula we know that:
% change in quantity =Q2--Q1 / (Q2+Q)/2 ×100
% change in price = P2 - P1 / (P2+P1)/2 × 100
Step 3. Then, those values can be used to determine the price elasticity of demand:
Price Elasticity of demand = % change in quantity / % change in price
The magnitude of the elasticity has increased (in absolute value) as we moved up along the demand curve from points A to B. Recall that the elasticity between these two points .
I will not able to put the values because you have not mention the figure.But it will help you to calculate the price elasticity of demand