(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?

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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%

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Students have asked these similar questions

ONLY ANSWER QUESTION #2 1. Online the timing and tailoring of prices to specific models of products is the key to successful pricing in online markets. And “Thanks to the ready availability of data in online markets, a pricing manager can easily approximate the elasticity of demands for the different products it sells online.”Assuming a 10 percent decrease in price increases sales by 28 percent, calculate the price elasticity of demand? If the wholesale price of the online product is $50 and sells at a price comparison site that charges $.50 per click and boasts a conversion rate of 5 percent (an average of 20 clicks are needed to generate a sale). What price should you charge for the product? What is the optimal markup on cost? 2. The authors assert that price sensitivity is affected by (1) product life cycles, and (2) numbers of competitors. In fact, “when the number of competing sellers doubles, a firm’s elasticity of demand is expected to double (and you should be able to verify…

#4 Determining the price elasticity of demand of a product involves all of the following factors, but NOT the total number of firms in a market. the availability of substitutes to the product. whether the product is a luxury or a necessity.

23) Suppose the price elasticity of demand for a product is 1.8. If a supplier wants to increase revenue, they shoud (increase or decrease price- SELECT ONE) increase 24) Goods that are considered luxuries tend to be more (price elastic or price inelastic- SELECT ONE)price elastic 25) When the price is increased and total revenues increase, the elasticity of demand is (price elastic or price inelastic- SELECT ONE)price inelastic

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%

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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%

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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...

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