Q: Suppose the price increases from $$13 to 17. $$What is the percentage change in quantity demanded using the midpoint method?

$$\frac{(48-60)}{(48+60)/2} \times 100 \approx -22.22\%$$

Question 1

Using the midpoint method, what is the price elasticity of demand when the price of bags rises from $$13 to 15$$?

Accepted Answer

$$\frac{(56-60)}{(56+60)/2} \div \frac{(15-13)}{(15+13)/2} = \frac{-4}{58} \div \frac{2}{14} \approx -0.48$$

Question 2

If the price of bags increases from $$15 to 17$$, what is the price elasticity of demand using the midpoint method?

Accepted Answer

$$\frac{(48-56)}{(48+56)/2} \div \frac{(17-15)}{(17+15)/2} = \frac{-8}{52} \div \frac{2}{16} \approx -1.23$$

Question 3

Based on the demand schedule, what happens to total revenue when the price increases from $$13 to 15$$?

Accepted Answer

Total revenue increases from $$780 to 840.$$

Question 4

If the price elasticity of demand between $$13 and 15 is $$less than 1 in absolute value, what does this imply about the demand for bags in this range?

Accepted Answer

Demand is inelastic; consumers are not very responsive to price changes.

Question 5

Suppose the price increases from $$13 to 17. $$What is the percentage change in quantity demanded using the midpoint method?

Accepted Answer

$$\frac{(48-60)}{(48+60)/2} 	imes 100 \approx -22.22\%$$

Demand Elasticities and Their Determinants

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