   Chapter 6, Problem 5WNG

Chapter
Section
Textbook Problem

In the accompanying figure, what is the price elasticity of demand between the two prices on D1? On D2?

To determine

The price elasticity of demand.

Explanation

Price elasticity of demand (Ed) can be calculated using the formula given below:

Ed=  ΔQdQaverage ΔPPaverage (1)

Here

ΔQd is the change in quantity demanded.

Qaverage stands for the average of the two quantities demanded.

ΔP is the change in price.

Paverage stands for the average of the two prices.

In the given graph, in D1, the price level rises from $10 to$12 and the quantity demanded decreases from 12 to 8.

Substitute the values in Equation-1 to get the value of price elasticity of demand on D1 as follows:

Ed=  (812)(8+122) (1210)(12+

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