The table below shows the demand schedule for museum admissions in a small city.
TABLE 4-1
-Refer to Table 4-1.Between the prices of $4 and $6 the price elasticity of demand is
A)0.50.
B)0.71.
C)1.00.
D)1.40.
E)0.40.

Question

The table below shows the demand schedule for museum admissions in a small city.
  TABLE 4-1
-Refer to Table 4-1.Between the prices of $4 and $6 the price elasticity of demand is
A)0.50. 
B)0.71. 
C)1.00. 
D)1.40. 
E)0.40.

Quizplus · Accepted Answer

To calculate the price elasticity of demand, we use the formula:

% change in quantity demanded / % change in price

For prices between $4 and $6, the quantity demanded changes from 310 to 240, or a decrease of 70. The percentage change in quantity demanded is:

% change in quantity demanded = (70 / 310) x 100% = 22.58%

The price changes from $4 to $6, or an increase of $2. The percentage change in price is:

% change in price = (2 / 4) x 100% = 50%

Using these values, we can calculate the price elasticity of demand:

Price elasticity of demand = (% change in quantity demanded) / (% change in price) = 22.58% / 50% = 0.715

Therefore, the answer is B) 0.71. This means that for every 1% increase in price, the quantity demanded will decrease by 0.71%.

The Table Below Shows the Demand Schedule for Museum Admissions