Question

Rank the absolute values of the price elasticities of demand at the points A, B, C, D and E on the following three demand curves. E E P_{D}>E p_{A}> E

Answer 1

To calculate the price elasticity of demand, use the formula E = (Q2 - Q1) / ((Q2 + Q1) / 2) / (P2 - P1) / ((P2 + P1) / 2). Substitute the values from the given points into the formula to calculate the elasticity. Classify the elasticity as elastic, inelastic, or unit elastic based on its magnitude.

Step-by-step explanation:

To calculate the price elasticity of demand between two points, you need to use the following formula:

E = (Q2 - Q1) / ((Q2 + Q1) / 2) / (P2 - P1) / ((P2 + P1) / 2)

Using the given data in Table 5.5, you can calculate the elasticity from point B to point C by substituting the values of quantity and price at those points into the formula. Repeat the process for point D to point E and point G to point H. Once you have the elasticity values, you can classify them as elastic, inelastic, or unit elastic based on their magnitudes. A value greater than 1 is elastic, a value less than 1 is inelastic, and a value equal to 1 is unit elastic.