Look at the demand curves in the diagrams below Use the midp

Look at the demand curves in the diagrams below. Use the midpoint formula and points a and b to calculate the elasticity of demand for that range of the demand curve.

Instructions: Enter positive values for elasticities (absolute value). Round your answer to one decimal place.

Elasticity of demand for D₁ (points a to b in the diagram above-left) =

Instructions: Enter positive values for elasticities (absolute value). Round your answer to two decimal places.

Elasticity of demand for D₂ (points c to d in the diagram above-right) =


Instructions: Enter positive values for elasticities (absolute value). Enter a whole number for your answer.

Elasticity of demand for D₃ (points e to f in the diagram above) =

Solution

Elasticity of demand for D1 = [(Q2 – Q1) / {(Q1 + Q2) / 2}] / [(P2 – P1) / {(P1 + P2) / 2]

                                              = [(40 – 10) / {(10 + 40) / 2] / [(1 – 2) / {(2 + 1) / 2]

                                              = 1.8

Elasticity of demand for D2 = [(Q2 – Q1) / {(Q1 + Q2) / 2}] / [(P2 – P1) / {(P1 + P2) / 2]

                                              = [(20 – 10) / {(10 + 20) / 2] / [(1 – 4) / {(4 + 1) / 2]

                                              = 0.56