Refer to the figure below. What is the price elasticity of demand when the price of rice is $6 per pound?
A)0.5
B)0.67
C)2

Question

Refer to the figure below. What is the price elasticity of demand when the price of rice is $6 per pound? 
A)0.5 
B)0.67 
C)2

Quizplus · Accepted Answer

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

From the graph, we can see that when the price of rice is $6 per pound, the quantity demanded is 15 million pounds. 
At a price of $9 per pound, the quantity demanded is 10 million pounds.

Using the formula for price elasticity of demand:

[(15-10)/ ((15+10)/2)] / [(9-6)/ ((9+6)/2)]

= 5/3

= 1.67

Since the price elasticity of demand is greater than 1, this is considered to be elastic demand. However, the closest answer choice is 2, which is incorrect. Therefore, the best choice is C, which is the closest answer to the calculated answer.

Refer to the Figure Below