Refer to the information provided in Figure 5.3 below to answer the questions that follow. Figure 5.3
-Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger is increased from $8 to $10, the price elasticity of demand equals ________ and demand is ________.
A) 4.5; elastic
B) -0.5; inelastic
C) -4.5; elastic
D) -9.0; inelastic

Question

Refer to the information provided in Figure 5.3 below to answer the questions that follow.  Figure 5.3
-Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger is increased from $8 to $10, the price elasticity of demand equals ________ and demand is ________.
A) 4.5; elastic 
B) -0.5; inelastic 
C) -4.5; elastic 
D) -9.0; inelastic

Quizplus · Accepted Answer

Using the midpoint formula:
Price elasticity of demand = [(change in quantity/average quantity) / (change in price/average price)]
= [(-100/((500+400)/2)) / (2/((8+10)/2))]
= -4.5
Since the absolute value of price elasticity of demand is greater than 1, demand is elastic. Therefore, the correct answer is C.

Refer to the Information Provided in Figure 5