indicate the answer choice that best completes the statement or answers the question. 1. when the price of…

indicate the answer choice that best completes the statement or answers the question. 1. when the price of candy bars is $1.20, the quantity demanded is 490 per day. when the price falls to $1.00, the quantity demanded increases to 500. given this information and using the mid - point method, we know that the demand for candy bars is a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic. scenario 5 - 2

indicate the answer choice that best completes the statement or answers the question. 1. when the price of candy bars is $1.20, the quantity demanded is 490 per day. when the price falls to $1.00, the quantity demanded increases to 500. given this information and using the mid - point method, we know that the demand for candy bars is a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic. scenario 5 - 2

Answer

Explanation:

Step1: Calculate percentage change in quantity demanded

The mid - point formula for percentage change in quantity demanded is $%\Delta Q=\frac{Q_2 - Q_1}{\frac{Q_2+Q_1}{2}}\times100$. Here, $Q_1 = 490$, $Q_2 = 500$. So, $%\Delta Q=\frac{500 - 490}{\frac{500 + 490}{2}}\times100=\frac{10}{\frac{990}{2}}\times100=\frac{10}{495}\times100\approx2.02%$.

Step2: Calculate percentage change in price

The mid - point formula for percentage change in price is $%\Delta P=\frac{P_2 - P_1}{\frac{P_2+P_1}{2}}\times100$. Here, $P_1 = 1.20$, $P_2 = 1.00$. So, $%\Delta P=\frac{1.00 - 1.20}{\frac{1.00+1.20}{2}}\times100=\frac{- 0.20}{\frac{2.20}{2}}\times100=\frac{-0.20}{1.10}\times100\approx - 18.18%$.

Step3: Calculate price elasticity of demand

The price elasticity of demand ($E_d$) is given by $E_d=\frac{%\Delta Q}{%\Delta P}$. So, $E_d=\frac{2.02%}{-18.18%}\approx - 0.11$. Since $|E_d|=0.11<1$, the demand is inelastic.

Answer:

A. inelastic