question 10 (1 point) when the price of bubble gum is $0.55, the quantity demanded is 400 packs per day…

question 10 (1 point) when the price of bubble gum is $0.55, the quantity demanded is 400 packs per day. when the price falls to $0.45, the quantity demanded increases to 600. given this information, and using the mid - point method, what do you know about the demand for bubble gum? it is perfectly inelastic. it is elastic. it is unit elastic. it is inelastic.

question 10 (1 point) when the price of bubble gum is $0.55, the quantity demanded is 400 packs per day. when the price falls to $0.45, the quantity demanded increases to 600. given this information, and using the mid - point method, what do you know about the demand for bubble gum? it is perfectly inelastic. it is elastic. it is unit elastic. it is inelastic.

Answer

Explanation:

Step1: Calculate percentage change in quantity demanded

The formula for percentage change in quantity demanded using the mid - point method is $\frac{Q_2 - Q_1}{\frac{Q_2+Q_1}{2}}\times100%$. Here, $Q_1 = 400$, $Q_2=600$. So, $\frac{600 - 400}{\frac{600 + 400}{2}}\times100%=\frac{200}{500}\times100% = 40%$.

Step2: Calculate percentage change in price

The formula for percentage change in price using the mid - point method is $\frac{P_2 - P_1}{\frac{P_2+P_1}{2}}\times100%$. Here, $P_1 = 0.55$, $P_2 = 0.45$. So, $\frac{0.45-0.55}{\frac{0.45 + 0.55}{2}}\times100%=\frac{- 0.1}{0.5}\times100%=-20%$.

Step3: Calculate price elasticity of demand

The price elasticity of demand ($E_d$) is the ratio of the percentage change in quantity demanded to the percentage change in price. $E_d=\frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}}=\frac{40%}{-20%}=- 2$. Since $|E_d| = 2>1$, demand is elastic.

Answer:

It is elastic.