Jill\'s Sausage Dog Stand projects the following demand for Jill\'s sausage dogs

ID: 1258906 • Letter: J

Question

Jill's Sausage Dog Stand projects the following demand for Jill's sausage dogs:

Calculate the price elasticity of demand between $2 and $4.---------------

The price elasticity of demand between $2 and $4 is ------------------

Is demand between the prices of $2 and $4 elastic or inelastic?

Calculate the price elasticity of demand between $4 and $6.

The price elasticity of demand between $4 and $6 is ------------------------------

Is demand in this range elastic or inelastic? ---------------------

Price ($) Quantity Purchased (per day) 2 50 4 40 6 20

The price elasticity of demand (Ep) between $2 and $4 is as below:

Ep = (% change in quantity demanded) / (% change in price)

= [{(40 – 50) / 50} × 100] / [{(4 – 2) / 2} × 100]

= - 0.2 (Answer)

If Arc method is used, Ep = [(40 – 50) / {(40 + 50) / 2}] / [(4 – 2) / {(2 + 4) / 2}] = - 0.33

Since Ep < 1, demand is inelastic.

The price elasticity of demand (Ep) between $4 and $6 is as below:

Ep = (% change in quantity demanded) / (% change in price)

= [{(20 – 40) / 40} × 100] / [{(6 – 4) / 4} × 100]

= - 1 (Answer)

If Arc method is used, Ep = [(20 – 40) / {(20 + 40) / 2}] / [(6 – 4) / {(6 + 4) / 2}] = - 1.67

Since Ep > 1, demand is elastic.

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