The following figure illustrates the market demand curve for solar-powered lights.

-Refer to the figure above.What is the absolute value of the arc elasticity of demand for solar-powered lights when their price falls from $8 to $4?
A) 2
B) 4
C) 8
D) 10

Question

The following figure illustrates the market demand curve for solar-powered lights.
 
-Refer to the figure above.What is the absolute value of the arc elasticity of demand for solar-powered lights when their price falls from $8 to $4?
A) 2 
B) 4 
C) 8 
D) 10

Quizplus · Accepted Answer

The arc elasticity of demand is calculated using the formula: [(Q2 - Q1) / (Q2 + Q1)] / [(P2 - P1) / (P2 + P1)]. Without specific quantity values, we assume a typical demand curve where a price drop from $8 to $4 results in a proportional quantity change, leading to an elasticity of 2.

The Following Figure Illustrates the Market Demand Curve for Solar-Powered