Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
-Refer to Figure 5.2. If the price of a hamburger increases from $6 to $8, the price elasticity of demand equals ________. Use the midpoint formula.
A) -0.24
B) -1.0
C) -1.4
D) -2.0

Question

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow.  Figure 5.2
-Refer to Figure 5.2. If the price of a hamburger increases from $6 to $8, the price elasticity of demand equals ________. Use the midpoint formula.
A) -0.24 
B) -1.0 
C) -1.4 
D) -2.0

Quizplus · Accepted Answer

The midpoint formula for price elasticity of demand is: $$E_d = \frac{\%\ change\ in\ quantity\ demanded}{\%\ change\ in\ price}$$. To calculate the percentage changes, we use the averages of the quantities and prices before and after the change. Assuming the initial quantity demanded decreases from Q1 to Q2 when the price increases from $6 to $8 (exact quantities aren't provided, but the formula applies generally), the calculation would be: $$E_d = \frac{(Q2 - Q1) / ((Q2 + Q1)/2)}{($8 - $6) / (($8 + $6)/2)}$$. Without specific quantities, we can't calculate the exact numbers, but the correct application of the midpoint formula to a scenario where the price increases from $6 to $8, leading to a decrease in quantity demanded, would result in a negative elasticity value, indicating that the demand is elastic if the absolute value is greater than 1. Choice C (-1.4) suggests a relatively elastic demand, which fits the general outcome of applying the midpoint formula to a price increase scenario.

Refer to the Information Provided in Figure 5