The following graph depicts demand.
Refer to the figure above.The price elasticity of demand at point D is:
A)5/2.
B)1/2.
C)2/5.
D)2.

Question

The following graph depicts demand. 
Refer to the figure above.The price elasticity of demand at point D is:
A)5/2. 
B)1/2. 
C)2/5. 
D)2.

Quizplus · Accepted Answer

The price elasticity of demand is calculated by the percentage change in quantity demanded divided by the percentage change in price. At point D, the price is $4 and the quantity demanded is 8. Moving up the demand curve to point C, a decrease in price from $4 to $3 results in an increase in quantity demanded from 8 to 12. The percentage change in quantity demanded is (12-8)/8 = 0.5 or 50%. The percentage change in price is (3-4)/4 = -0.25 or -25%. Therefore, the price elasticity of demand at point D is 0.5/-0.25 = -2. Since elasticity is usually reported as a positive number, the absolute value of -2 is 2. Therefore, the correct answer is C) 2/5.

The Following Graph Depicts Demand