suppose the demand for eggs sold by a convenience store is given by the graph above. suppose that the store…

Explanation:

Step1: Identify initial and new points

From the graph, assume initial price $P_1 = 6$ (approx - where we start on the demand - curve) and initial quantity $Q_1=10$, new price $P_2 = 3$ and from the graph, new quantity $Q_2 = 60$.

Step2: Calculate percentage - change in quantity

The formula for percentage - change in quantity using the mid - point method is $%\Delta Q=\frac{Q_2 - Q_1}{\frac{Q_2+Q_1}{2}}\times100$. Substitute $Q_1 = 10$ and $Q_2 = 60$: [ \begin{align*} %\Delta Q&=\frac{60 - 10}{\frac{60 + 10}{2}}\times100\ &=\frac{50}{35}\times100\ &\approx142.857 \end{align*} ]

Step3: Calculate percentage - change in price

The formula for percentage - change in price using the mid - point method is $%\Delta P=\frac{P_2 - P_1}{\frac{P_2+P_1}{2}}\times100$. Substitute $P_1 = 6$ and $P_2 = 3$: [ \begin{align*} %\Delta P&=\frac{3 - 6}{\frac{3+6}{2}}\times100\ &=\frac{- 3}{4.5}\times100\ &\approx - 66.667 \end{align*} ]

Step4: Calculate price elasticity of demand

The formula for price elasticity of demand ($E_d$) is $E_d=\frac{%\Delta Q}{%\Delta P}$. [ \begin{align*} E_d&=\frac{142.857}{-66.667}\ &\approx - 2.143 \end{align*} ]

Answer:

• 2.143