Multiple Choice
At what price is the elasticity of demand for the product equal to one?
4. Elasticity
Total Revenue Along a Linear Demand Curve
Multiple Choice
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 price changes from \$3 to \$5, and you need to find the corresponding quantities on the demand curve.
Locate the quantity demanded at the initial price of \$3 on the graph. Let's denote this quantity as Q1.
Locate the quantity demanded at the final price of \$5 on the graph. Let's denote this quantity as Q2.
Calculate the percentage change in quantity demanded using the formula: \( \frac{Q2 - Q1}{(Q2 + Q1)/2} \times 100 \).
Calculate the percentage change in price using the formula: \( \frac{5 - 3}{(5 + 3)/2} \times 100 \). Then, use the elasticity of demand formula: \( \frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}} \) to find the elasticity.
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