Question

Od
Using the midpoint method, calculate the price elasticity of demand for ice cream cones in the
market if P, = 550, 041 = 5000 and P2 = 790, 042 = 3000
a. 0.755
b. 0.875
C. 0.555
d. 0.215​

Answer 1

Answer:

Answer on Question #50396–Economics –Microeconomics Using the midpoint method (show your work), calculate the price elasticity of demand when the price of an ice cream cone rises from $3 to $4. What does this estimate imply about the price elasticity of demand for ice cream cones?We denote that:푄1isthe demand for ice cream cone with the price $3;푄2is the demand for ice cream cone with the price $4.The price elasticity of demand for ice cream cones is:퐸=(푄2−푄1)푄1+푄22⁄(푃2−푃1)푃1+푃22⁄=푄2−푄1푄1+푄2∗푃1+푃2푃2−푃1=푄2−푄1푄1+푄2∗$3+$4$4−$3=7∗푄2−푄1푄1+푄2If E<1, than the demand is inelastic: the product price growth largely overlaps the decline in demand and the gross income increases.If E=1, the product price growth only compensates the reduction

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