-Refer to Figure 5.1.Using the initial-value method,if the price of a hamburger is increased from $6 to $8,the price elasticity of demand equals:
A)0.7.
B)5.0.
C)1.0.
D)2.0.

Question

-Refer to Figure 5.1.Using the initial-value method,if the price of a hamburger is increased from $6 to $8,the price elasticity of demand equals:
A)0.7. 
B)5.0. 
C)1.0. 
D)2.0.

Quizplus · Accepted Answer

The initial-value method calculates price elasticity of demand using the formula: (percentage change in quantity demanded) / (percentage change in price). If the price increases from $6 to $8, the percentage change in price is (8-6)/6 = 1/3 or approximately 33.33%. Assuming the percentage change in quantity demanded is the same, the elasticity would be 1.0, indicating unitary elasticity.