Refer to the following figure: -The point elasticities of demand for D₁, D₂, and D₃ at a price of $5 are ________, ________, and _______, respectively. A) -.4; -0.2; -1.4 B) -0.71;-5; -0.71 C) -1.4; -0.2; -5 D)-12; -6; -12 E) -0.0833; -0.1667; -0.0833

Question

Quizplus · Accepted Answer

To calculate the point elasticity of demand, we use the formula:

where Q1 and Q2 are the quantities demanded at prices P1 and P2 respectively.
At a price of $5, the quantities demanded for each product are:
Q1 = 1000 - (5)(50) = 750
Q2 = 1000 - (5)(75) = 625
Q3 = 1000 - (5)(50) - (5)(25) = 500
Using the formula above, the point elasticities of demand for each product are:

Product 1: ((750/1000) - (625/1000)) / ((5/625) + (5/750))
= (0.125 / 0.02667)
= 4.688
Product 2: ((625/1000) - (750/1000)) / ((5/750) + (5/625))
= (-0.125 / 0.02667)
= -4.688
Product 3: ((500/1000) - (625/1000)) / ((5/625) + (5/500))
= (-0.125 / 0.03333)
= -3.75

Rounding each answer to one decimal place, we get:
Product 1: 4.7
Product 2: -4.7
Product 3: -3.8

Therefore, the answer is B: F1F1F1S1F1F1F100.71; F1F1F1S1F1F1F105; F1F1F1S1F1F1F100.71.

Refer to the Following Figure