suppose that during the past year, the price of a laptop computer fell from $2,5
ID: 1144135 • Letter: S
Question
suppose that during the past year, the price of a laptop computer fell from $2,500 to $2,300. During the same time period, consumer sales increased from 403,000 to 549,000 laptops. from 403,000 to 549,000 laptops. Calculate the elasticity of demand between these two part of the table with the appropriate answers. (Note: price-quantity combinations by using the For decreases in price or quantity, enter values in the Change column with a minus sign,) Quantity following steps. After each step, complete the relevant price or dividing by two. Do the same for the averageExplanation / Answer
1. Original Quantity = 403,000
New Quantity = 549,000
Original Price = 2,500
New Price = 2,300
2. Average price = (2500 + 2300)/2 = 4800/2 = 2400
Average quantity = (403,000 + 549,000) / 2 = 952000/2 = 476000
3. Change in quantity = 549,000 - 403,000 = 146,000
Change in price = 2300 - 2500 = - 200
4. % change in quantity demanded = 146000/476000 = 0.306
% change in price = - 200/2400 = - 0.083
5. Price Ed = % change in quantity demanded / % change in price = 0.306/0.083 = 3.686
6. Using Mid point method:
Ed = (P1 + P2)/(Q1 + Q2) x (Q2 - Q1)/(P2 - P1)
= (2500 + 2300)/(403000 + 549000) x (549000 - 403000)/(2300 - 2500)
= 4800/952000 x 146000/(- 200) = - 0.0050 x 730 = - 3.65
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