Figure 5-3Refer to Figure 5-3. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

Question

Figure 5-3​Refer to Figure 5-3. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

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Reframing the problem helps: we are asked to compute the price elasticity of demand using the midpoint (arc) formula for the segment of the demand curve where price changes from $20 to $30.

First, determine the corresponding quantities from the demand curve. The graph shows a downward-sloping linear demand line passing through (Q = 50, P ≈ 0) and (Q ≈ 0, P ≈ 100). Using the inverse relation P = 100 − 2Q, we solve for Q at the given prices:
- When P = 20, Q = (100 − 20)/2 = 40.
- When P = 30, Q = (100 − 30)/2 = 35.

Next, compute the changes needed for the midpoint formula:
- ΔQ = Q2 − Q1 = 35 − 40 = −5 units.
- ΔP = P2 − P1 = 30 − 20 = 10 dollars.
- The midpoint values (for the elasticity numerator/denominator) are:
  - P average = (P1 + P2)/2 = (20 + 30)/2 = 25.
  - Q average = (Q1 + Q2)/2 = (40 + 35)/2 = 37.5.

Now apply the midpoint (arc) elasticity formula, which is:
ε = (ΔQ/ΔP) × (P average / Q average).
Plugging in the numbers:
ε = (−5/10) × (25/37.5) = −0.5 × 0.666... ≈ −0.333...

Since elasticity is typically expressed in absolute value when asked for a magnitude, |ε| ≈ 0.33.

Interpreting the result: a relatively small absolute elasticity (~0.33) indicates that demand is inelastic over this price range, meaning quantity demanded changes by a smaller percentage than the price changes in this interval.

Note about the data: the calculation relies on the linear, downward-sloping demand relationship depicted in the figure and the midpoint method formula. If the price-quantity coordinates were read slightly differently from the graph, the numerical result would shift slightly, but the same small, inelastic magnitude would generally follow from the plotted slope.

ECB1101 - S1 2025 Online Quiz 4

Figure 5-3Refer to Figure 5-3. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

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ECB1101 - S1 2025 Online Quiz 4

Figure 5-3​Refer to Figure 5-3. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

View Explanation

Log in for full answers

Similar Questions

If a company needs to raise the prices of some its products, it should choose to raise the prices of Blank ______ products because relatively fewer customers will stop buying the product as a result.

Calculate the price elasticity of demand for a change in price from $10.00 to $15.00. Price Quantity $10.00 20 $15.00 15

For substitutes, the cross-price elasticity is ___, the own price elasticity is ___.

If the price elasticity of demand coefficient is (-)1, total revenue will remain constant when price rises or price falls.

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

Figure 5-3Refer to Figure 5-3. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

For substitutes, the cross-price elasticity is _, the own price elasticity is _.