Exhibit 5-8 Supply and demand curves for good X As shown in Exhibit 5-8, the price elasticity of demand for good X between points E and Z is:
A) 3/13 = 0.23.
B) 13/3 = 4.33.
C) 1/3 = 0.33.
D) 1.

Question

Exhibit 5-8  Supply and demand curves for good X  As shown in Exhibit 5-8, the price elasticity of demand for good X between points E and Z is:
A) 3/13 = 0.23. 
B) 13/3 = 4.33. 
C) 1/3 = 0.33. 
D) 1.

Quizplus · Accepted Answer

Price elasticity of demand (PED) = (% change in quantity demanded) / (% change in price)
Between points E and Z, the price increases from $3 to $4, a 33.3% increase. The quantity demanded decreases from 13 to 10, a 23.1% decrease. Therefore:
PED = (-23.1%) / (33.3%) = -0.693 = 0.23 (absolute value)
Since elasticity is always positive, the price elasticity of demand for good X between points E and Z is 0.23. Choice A is correct.

Exhibit 5-8 Supply and Demand Curves for Good X as Shown