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 %

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 %

Answer

Explanation:

Step1: Identify initial and new points

From the graph, assume initial price $P_1 = 6$ (approx - pick a point on the demand - curve), quantity $Q_1 = 10$, new price $P_2 = 3$, and from the graph, new quantity $Q_2=70$.

Step2: Calculate the mid - points

Mid - point of quantity $Q_m=\frac{Q_1 + Q_2}{2}=\frac{10 + 70}{2}=40$. Mid - point of price $P_m=\frac{P_1+P_2}{2}=\frac{6 + 3}{2}=4.5$.

Step3: Calculate percentage change in quantity

Percentage change in quantity $%\Delta Q=\frac{Q_2 - Q_1}{Q_m}\times100=\frac{70 - 10}{40}\times100=\frac{60}{40}\times100 = 150%$.

Step4: Calculate percentage change in price

Percentage change in price $%\Delta P=\frac{P_2 - P_1}{P_m}\times100=\frac{3 - 6}{4.5}\times100=\frac{- 3}{4.5}\times100\approx - 66.667%$.

Step5: Calculate price elasticity of demand

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

Answer:

  • 2.250