14. Suppose the demand for Head tennis rackets is D1 , illustrated in the figure

Question

14.

Suppose the demand for Head tennis rackets is D1 , illustrated in the figure to the right.

Suppose the demand for Head tennis rackets is D1, illustrated in the figure to the right. 140 130 120 What is the elasticity of demand between prices $90 and $70 along D1 (use the midpoint formula)? (Enter a numeric response using a real number rounded to two decimal places.Don't forget the minus sign.) 90 E 80 Instead, suppose the demand for Head tennis rackets is D2 Relative to demand curve D1, demand curve D2 is 60 50 more elastic Di 30 20 10- less elastic 0 2 46 8 10 12 14 16 18 20 Quantity of Head tennis rackets (per day)

Explanation / Answer

Answer 1: The elasticity of demand = % change in demand/% change in price. According to the midpoint formula, the average of the new and the old quantity or price are taken as the base.

Average of new and old price = (90 + 70)/2 = 160/2 = 80

Average of new and old quantity = (5 + 10)/2 = 15/2 = 7.5

% change in demand = (10 - 5)/7.5 * 100 = 5/7.5 * 100 = 0.6666 * 100 = 66.66%

% change in price = (70 - 90)/80 * 100 = -20/80 * 100 = -0.25 * 100 = -25%

So, the price elasticity of demand = 66.66/25 = - 2.66

Answer 2: Less elastic.

Explanation: The D2 demand curve is steeper than the D1 demand curve. That means the rate of change in demand with price is lower in the D2 curve than the D1 curve. So, the D2 curve is relatively inelastic i.e. less elastic. Note that the flatter a demand curve, the more elastic it is and the steeper is a demand curve, the more inelastic it is.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.