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

suppose the demand for eggs sold by a convenience store is given by the graph above. suppose that the store slashed the price to $3 per carton. calculate the price elasticity using the midpoint method: (use at least 3 decimal points in your answer. make sure to choose the correct sign for change as well as for the elasticity.) 1. the percentage change in quantity is select % 2. the percentage change in price is select %

suppose the demand for eggs sold by a convenience store is given by the graph above. suppose that the store slashed the price to $3 per carton. calculate the price elasticity using the midpoint method: (use at least 3 decimal points in your answer. make sure to choose the correct sign for change as well as for the elasticity.) 1. the percentage change in quantity is select % 2. the percentage change in price is select %

Answer

Explanation:

Step1: Identify initial and new price - quantity pairs

From the graph, assume initial price $P_1 = 6$ (approximate where quantity is around 10) and new price $P_2=3$. Corresponding quantity $Q_1 = 10$ and $Q_2$ (when $P_2 = 3$) is around 70.

Step2: Calculate percentage change in quantity

The formula for percentage change in quantity using mid - point method is $%\Delta Q=\frac{Q_2 - Q_1}{\frac{Q_2+Q_1}{2}}\times100$. $%\Delta Q=\frac{70 - 10}{\frac{70 + 10}{2}}\times100=\frac{60}{40}\times100 = 150$

Step3: Calculate percentage change in price

The formula for percentage change in price using mid - point method is $%\Delta P=\frac{P_2 - P_1}{\frac{P_2+P_1}{2}}\times100$. $%\Delta P=\frac{3 - 6}{\frac{3+6}{2}}\times100=\frac{- 3}{4.5}\times100\approx - 66.667$

Step4: Calculate price elasticity of demand

The formula for price elasticity of demand $E_d=\frac{%\Delta Q}{%\Delta P}$. $E_d=\frac{150}{-66.667}\approx - 2.250$

Answer:

  • 2.250