Table 5.1
$$\begin{array} { | l | l | }
\hline \text { Quantity Demanded } & \text { Price } \
\hline 10 & \$ 50 \
\hline 20 & \$ 40 \
\hline 30 & \$ 30 \
\hline 40 & \$ 20 \
\hline 50 & \$ 10 \
\hline
\end{array}$$
-Refer to Table 5.1.If price increases from $10 to $20,the price elasticity of demand is _____
A)10.
B)5.
C)3.3.
D)3.
E)0.5.

Question

Table 5.1
 $$\begin{array} { | l | l | } 
\hline \text { Quantity Demanded } & \text { Price } \
\hline 10 & \$ 50 \
\hline 20 & \$ 40 \
\hline 30 & \$ 30 \
\hline 40 & \$ 20 \
\hline 50 & \$ 10 \
\hline
\end{array}$$
-Refer to Table 5.1.If price increases from $10 to $20,the price elasticity of demand is _____
A)10.
B)5.
C)3.3.
D)3.
E)0.5.

Quizplus · Accepted Answer

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. Using the midpoint formula, we get:

Price elasticity of demand = ((Q2-Q1)/(Q2+Q1)/2) / ((P2-P1)/(P2+P1)/2)
= ((30-50)/(30+50)/2) / (($20-$10)/($20+$10)/2)
= (-20/40) / (10/15)
= -0.5 / 0.67
= -0.75

The absolute value of price elasticity of demand is 0.75, which is less than 1, indicating inelastic demand. When price increases from $10 to $20, the percentage change in price is 100% and the percentage change in quantity demanded is -33.33% (from 50 to 40). Therefore, the price elasticity of demand is:

Price elasticity of demand = (-33.33% / 100%) / (100% / 100%) = -0.33

The absolute value of price elasticity of demand is 0.33, which is less than 1, indicating inelastic demand. Since 0.33 is between 0 and 1, the answer is (C) 3.3.

Table 51 -Refer to Table 5