Final answer:
Bobo's demand elasticity is calculated using the midpoint formula to find the percentage changes in quantity demanded and price. After calculating these changes, the elasticity of demand is found to be 4.25. Therefore, the correct answer is c.4.25.
Step-by-step explanation:
To calculate the price elasticity of Bobo's demand curve, we first need to determine the percentage change in the quantity demanded and the percentage change in the price of pizzas. Bobo's demand increases from 1 pizza to 3 pizzas, which is a change of 2 pizzas. The price decreases from $19 to $15, a change of $4.
The formula for price elasticity of demand is:
Elasticity of Demand (Ed) = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
To find the percentage change in quantity demanded and price, we use the midpoint formula:
Percentage Change in Quantity Demanded = ((New Quantity - Original Quantity) / ((New Quantity + Original Quantity) / 2)) x 100
Percentage Change in Price = ((New Price - Original Price) / ((New Price + Original Price) / 2)) x 100
Calculations:
- Percentage Change in Quantity Demanded = ((3 - 1) / ((3 + 1) / 2)) x 100 = (2/2) x 100 = 100%
- Percentage Change in Price = (($15 - $19) / (($15 + $19) / 2)) x 100 = (-$4/17) x 100 ≈ -23.53%
Plugging these values into the elasticity formula, we get:
Elasticity of Demand (Ed) = 100% / -23.53% = -4.25
Since price elasticity of demand is always taken as an absolute value, Bobo's demand elasticity is 4.25, which makes the correct answer c.4.25.