2101 Demand i 7535 0 10 QUANTITY Units For each of the regio

210-1 Demand i 7535 0 10 QUANTITY (Units) For each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit Region Between X and Y Between Between Y and Z Elastic Inelastic Unit Elastic and X

Solution

Price elasticity demand formula = [(Q2 - Q1) (P2 + P1) ]/ [ (Q2+Q1) (P2 - P1)]

For X and Y

Q1 = 25

Q2 = 35

P1 = 105

P2 = 75

Price elasticity demand =  [(Q2 - Q1) (P2 + P1) ]/ [ (Q2+Q1) (P2 - P1)]

Price elasticity demand =   [(75 + 105) (35 - 25) ]/ [ (75-105) (35 + 25)]

Price elasticity demand = [( 180x10) / (-30x60)]

Price elasticity demand = -1

So the region between X and Y is inelastic.

2) Between W and X

P1 = 210

P2 = 105

Q1 = 10

Q2= 25

Price elasticity demand =  [(Q2 - Q1) (P2 + P1) ]/ [ (Q2+Q1) (P2 - P1)]

Price elasticity demand =   [(105 + 210) (25 - 10) ]/ [ (105-210) (25 + 10)]

Price elasticity demand = [(315x15)/(-105x35]

Price elasticity demand = -1.286

So the region between W and Xis inelastic.

3) Between Y and Z

Q2 = 70

Q1 = 35

P2 = 30

P1 = 75

Price elasticity demand =  [(Q2 - Q1) (P2 + P1) ]/ [ (Q2+Q1) (P2 - P1)]

Price elasticity demand =   [(70 - 35) (30 + 75) ]/ [ (70+35) (30 - 75)]

Price elasticity demand = [( 30x105) / (105x-45)]

Price elasticity demand = -0.778

So the region between Y and Z is inelastic.