If the price of suntan lotion increases from $6 to $8 per bottle and quantity demanded decreases from 900,000 bottles to 845,000 bottles, using the midpoint method, what is the price elasticity of demand for suntan lotion?
What will be an ideal response?
The price elasticity of demand = (percentage change in the quantity demanded) ÷ (percentage change in the price). Use the midpoint method to calculate the percentages. Thus the percentage change in the quantity demanded = (900,000 - 845,000 ) ÷ (872,500 ) = 6.3 percent and the percentage change in the price is ($8 - $6 ) ÷ ($7 ) = 28.6 percent. Therefore the elasticity of demand equals (6.3 percent) ÷ (28.6 percent) = 0.22.
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An increase in the money ________ shifts the LM curve to the ________, causing the interest rate to fall and output to rise, everything else held constant
A) demand; right B) demand; left C) supply; right D) supply; left
A firm is producing 100 pencils per week. The production process requires labor and capital as inputs. Labor costs $6 per labor hour and capital costs $12 per machine hour. Currently, the marginal product of labor is 18 pencils and the marginal product of capital is 36 pencils. To minimize the cost of producing this level of output the firm should use:
A. More capital and less labor B. More labor and less capital C. Less labor and less capital D. The current amounts of labor and capital