For numbers 57 When abdominoplasty costs were 6000 Dr Hurwit

For numbers 5-7

When abdominoplasty costs were $6,000, Dr. Hurwitz treated 300 patients. When they dropped the price to $5,000, customers increased to 600.

(5) What is the elasticity of demand for abdominoplasty using arc elasticity or the midpoints formula (rounded-off to 2 decimal places)?

- 33.00

- 3.67

- 0.27

- 0.67

- 0.03

Solution

Elasticity of demand = [Change in demand / Average demand] / [Change in price / Average price]

= [300 / (300 + 600) / 2] / [- 1,000 / (6,000 + 5,000) / 2]

= [300 / 450] / [- 1,000 / 5,500]

= 0.6667 / - 0.1818

= - 3.67

Correct option (b).