Multiple Choice
Use this graph to answer the following questions.
At what price is the elasticity of demand for the product equal to one?
4. Elasticity
Total Revenue Along a Linear Demand Curve
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Use this graph to answer the following questions.
What is the elasticity of demand when the price of the good changes from $3 to $5?
A
0.25
B
0.50
C
1.00
D
2.00
Verified step by step guidance1
Identify the initial and final prices and quantities from the graph. The initial price (P1) is $3, and the final price (P2) is $5. Find the corresponding quantities: Q1 at P1 and Q2 at P2.
Use the formula for elasticity of demand: \( E_d = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}} \).
Calculate the percentage change in price: \( \% \Delta P = \frac{P2 - P1}{P1} \times 100 \).
Calculate the percentage change in quantity demanded: \( \% \Delta Q = \frac{Q2 - Q1}{Q1} \times 100 \).
Substitute the percentage changes into the elasticity formula to find the elasticity of demand.
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