The following graph shows the demand for a good For each of

The following graph shows the demand for a good.

For each of the regions, use the midpoint method to identify whether the demand for this good is elastic, (approximately) unit elastic, or inelastic.

Region

Elastic   

Inelastic

Unit Elastic

True or False:

The value of the price elasticity of demand is not equal to the slope of the demand curve.

Region	Elastic	Inelastic	Unit Elastic
Between Y and Z	-----------	----------	----------------
Between W andX	------	----------------
Between X and Y	--	--

140 Demand QUANTITY (Units)

Solution

Between Y and Z Original Price: 70 New price: 20 Change in price: -50 Average price: 45 % Change in Price: -50 /45 = -111.11% Original demand: 45 New demand: 70 Change in demand: 25 Average demand: 57.5 % Change in demand: 25/57.5 = 43.48% Proce elasticity : % Change in demand/ % change ein price 43.48% /111.11% = -0.39 Inelastic between Y and Z Between W and X Original Price:140 New price: 90 Change in price: -50 Average price: 115 % Change in price: -50 /115 = -43.48% original demand: 10 New demand: 35 Change in demand: 25 Average demand: 22.50 % Change in demand: 25/22.5 = 111.11% Price elasticity: 111.11 /43.48 % = -2.56 Elastic between W and X Point X and Y Original price: 90 New price: 70 Change in price: -20 Averagae price: 80 % change in price: 25% Orginal demand: 35 New demand: 45 Change in demand: 10 % change in demand: 25% Price elastivity of demand: 25% /25% = 1 Unit elastic at X and Y False, the value of price elasticity of demand is equal to slope of demnd curve.