the following graph shows two known points (x and y) on a demand curve for tomatoes. choose the response…
the following graph shows two known points (x and y) on a demand curve for tomatoes. choose the response that correctly fills in the two blanks: according to the standard method, the absolute value of the price elasticity of demand for tomatoes when moving from point x to point y is approximately ______, which suggests that the demand for tomatoes is ______ between points x and y.
Answer
Explanation:
Step1: Identify price and quantity values
Point X: $P_1 = 2$, $Q_1=90$; Point Y: $P_2 = 3$, $Q_2 = 70$.
Step2: Calculate percentage - change in quantity
$%\Delta Q=\frac{Q_2 - Q_1}{Q_1}\times100=\frac{70 - 90}{90}\times100=\frac{- 20}{90}\times100\approx - 22.22%$
Step3: Calculate percentage - change in price
$%\Delta P=\frac{P_2 - P_1}{P_1}\times100=\frac{3 - 2}{2}\times100 = 50%$
Step4: Calculate price - elasticity of demand
$E_d=\frac{%\Delta Q}{%\Delta P}=\frac{-22.22%}{50%}\approx - 0.44$. The absolute value $|E_d|\approx0.44$.
Step5: Determine elasticity type
Since $|E_d| = 0.44<1$, demand is inelastic.
Answer:
0.44, inelastic