Consider demand for digital SLR cameras in some market. When the price of digital SLR cameras was $2000, consumers bought 4000 units. Instead, when the price fell to $1200, consumers bought 5000 units.Important note: if you arrive at an answer for the price elasticity of demand that is a negative number, you should ignore the minus sign and choose the corresponding answer that is a positive number.Group of answer choicesUsing the midpoint method, the price elasticity of demand is 0.44 (rounded to 2 decimal places)Using the midpoint method, the price elasticity of demand is 0.625 (rounded to 2 decimal places)The demand for SLR cameras is elastic in this regionTotal expenditure (or total revenue) in the SLR camera market decreased with the price fall
Question
Consider demand for digital SLR cameras in some market. When the price of digital SLR cameras was 1200, consumers bought 5000 units.Important note: if you arrive at an answer for the price elasticity of demand that is a negative number, you should ignore the minus sign and choose the corresponding answer that is a positive number.Group of answer choicesUsing the midpoint method, the price elasticity of demand is 0.44 (rounded to 2 decimal places)Using the midpoint method, the price elasticity of demand is 0.625 (rounded to 2 decimal places)The demand for SLR cameras is elastic in this regionTotal expenditure (or total revenue) in the SLR camera market decreased with the price fall
Solution
The price elasticity of demand can be calculated using the midpoint method. The formula for the midpoint method is:
Elasticity = ((Q2 - Q1) / ((Q2 + Q1) / 2)) / ((P2 - P1) / ((P2 + P1) / 2))
Where: Q1 is the initial quantity demanded, which is 4000 units. Q2 is the final quantity demanded, which is 5000 units. P1 is the initial price, which is 1200.
Substituting these values into the formula, we get:
Elasticity = ((5000 - 4000) / ((5000 + 4000) / 2)) / ((1200 - 2000) / ((1200 + 2000) / 2)) Elasticity = (1000 / 4500) / (-800 / 1600) Elasticity = 0.2222 / -0.5 Elasticity = -0.4444
Ignoring the negative sign, the price elasticity of demand is 0.44 (rounded to 2 decimal places).
Therefore, the correct answer is "Using the midpoint method, the price elasticity of demand is 0.44 (rounded to 2 decimal places)".
The demand for SLR cameras is inelastic in this region because the price elasticity of demand is less than 1.
The total expenditure (or total revenue) in the SLR camera market increased with the price fall because the quantity demanded increased more than the decrease in price.
Similar Questions
Suppose the price of local cable TV service increased from $35.00 to $38.00 and as a result the number of cable subscribers decreased from 300,000 to 280,000. Along this portion of the demand curve, using the midpoint method, price elasticity of demand is approximatelyMultiple Choice−1.11.−0.84.−0.61.−1.17.
Suppose the price of product X is reduced from $16.00 to $12.00 and, as a result, the quantity of X demanded increases from 300 to 450. Using the midpoint method, the price elasticity of demand for X in the given price range is:Group of answer choices1.401.000.400.29
Say your friend Nick sells skateboards. He sells 30 a week at $150. He then raises his price to $175 and sells 25. Use the midpoint formula to determine a fractional numerical value for the price elasticity of demand.A.24/26B.4/24C.4/143D.22/26E.13/11
Use the data in the table below to answer the following question. Price Quantity Demanded$20 1218 1716 2014 2412 3010 368 406 444 48 The price elasticity of demand (based on the midpoint formula) when price increases from $10 to $12 isMultiple Choice-3.29.-1.37.-1.-0.33.
If price increases from $3.00 to $4.00, and quantity demanded falls from 600 to 200 cups: a. The price elasticity of demand will (according to the mid-point method) be 0.29 and inelastic b. The price elasticity of demand will (according to the mid-point method) be 3.5 and elastic c. The price elasticity of demand will (according to the mid-point method) be 3.5 and inelastic d. The price elasticity of demand will (according to the mid-point method) be 0.29 and elastic
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.