When the price of candy bars is $1.10, the quantity demanded is 340 per day. When the price falls to $0.90, the quantity demanded increases to 350. Given this information and using the midpoint method, we know that the demand for candy bars is
A)inelastic.
B)elastic.
C)unit elastic.
D)perfectly inelastic.

Question

Quizplus · Accepted Answer

The midpoint method for elasticity is calculated as [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Plugging in the given numbers: [(350 - 340) / (350 + 340)/2] / [($0.90 - $1.10) / ($0.90 + $1.10)/2] = 10/345 / -0.20/1 = -0.058 / -0.20 = 0.29, which is less than 1, indicating inelastic demand.

When the Price of Candy Bars Is $1