Question

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is:_______. a. 0.35 b. 0.43 c. 2.33 d. 2.89

Answer 1

The correct answer is C,2.33

Step-by-step explanation:

The midpoint formula for elasticity of demand is given as :

percentage change in quantity demand/percentage in price

percentage change in quantity demanded is Q2-Q1/(Q2+Q1)/2*100

percentage change in price is P2-P1/(P2+P1)/2*100

P1=$6.5

P2=$5.75

Q1=600

Q2=800

percentage change quantity demanded =(800-600)/(800+600)/2*100

percentage change quantity demanded=28.57142857

Percentage change in price=(5.75-6.5/(5.75+6.5)/2)*100

percentage change in price=12.24489796

midpoint elasticity of demand= 28.57142857 /2.24489796

=2.33