The following graph depicts demand. The price elasticity of demand at point B is:
A)3/4.
B)4/3.
C)3.
D)1/3.

Question

The following graph depicts demand.  The price elasticity of demand at point B is:
A)3/4. 
B)4/3. 
C)3. 
D)1/3.

Quizplus · Accepted Answer

The price elasticity of demand at point B is calculated as the percentage change in quantity demanded divided by the percentage change in price. From the graph, at point B, the quantity demanded decreases from 400 to 300, which is a 25% decrease (100/400). The price increases from $3 to $4, which is a 33.33% increase ((4-3)/3*100). Therefore, the price elasticity of demand is (25/100) / (33.33/100) = 0.75 / 0.3333 = 2.25 or 4/3.

The Following Graph Depicts Demand