3 Using the midpoint method The following graph shows two kn

3. Using the midpoint method The following graph shows two known points (X and Y) on a demand curve for apples. 10 T Demand 0 10 2030 40 60 60 70 80 00 100 QUANTITY (Thousands of pounds of apples)

Solution

Q1. Change in Price: =1 Average price: 7.5 % change in price: 1/7.5 *100 = 13.33% Change in demand: -10 Average Demand: 35 % change in demand: -10 /35 *100 = -28.57% Price elasticity: % change in demand/ % change in price (-28.57% /13.33% )= -2.14 Therefore, Price elasticity is 2.14 The demand fro apples is Elastic Q2. Between A and E , Curve OO is unit elastic False (it is inelastic) Curve NN is less elastic between A and D, thana curve MM is between A and C TRUE Between A and D curve NN is elastic FALSE