Question 1

Using the midpoint method to calculate the price elasticity of demand eliminates the problem of computing:
A.different elasticities, depending on whether price decreases or increases.
B.different elasticities, because price and quantity are inversely related on the demand curve.
C.total revenue when price falls and demand is inelastic.
D.total revenue when price falls and demand is elastic.

Accepted Answer

The answer of Using the midpoint method to calculate the...

Question 2

Figure: The Demand for Shirts   (Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.The price elasticity of demand for the segment BC, using the midpoint method, is:
A)greater than 3.33.
B)3.33.
C)3.
D)0.33.

Accepted Answer

The answer of Figure: The Demand for Shirts  ...

Question 3

If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:
A)0.5.
B)1.
C)2.
D)greater than 2.

Accepted Answer

Using the midpoint method formula:
Price elasticity of demand = [(Q2 - Q1)/((Q1 + Q2)/2)] / [(P2 - P1)/((P1 + P2)/2)]
Plugging in the values given:
Price elasticity of demand = [(220 - 180)/((220 + 180)/2)] / [(0.95 - 1.05)/((0.95 + 1.05)/2)]
Price elasticity of demand = [40/200] / [-0.1/1]
Price elasticity of demand = 0.2 / -0.1
Price elasticity of demand = -2
Since the price elasticity of demand (using the midpoint method) is greater than 2, the answer is D.

Question 4

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:
A)0.
B)0.5.
C)1.
D)2.

Accepted Answer

Price elasticity of demand (using midpoint method) formula is:

%ΔQd/%ΔP = [(Qd2 - Qd1)/((Qd2 + Qd1)/2)] / [(P2 - P1)/((P2 + P1)/2)]

%ΔQd = [(Qd2 - Qd1)/((Qd2 + Qd1)/2)] * 100 = [(220 - 180)/((220 + 180)/2)] * 100 = 20%

%ΔP = [(P2 - P1)/((P2 + P1)/2)] * 100 = [($0.90 - $1.10)/($0.90 + $1.10)/2)] * 100 = -18.18%

%ΔQd/%ΔP = 20% / -18.18% = -1.1

The negative sign means that chocolate-covered peanuts are a normal good, and the absolute value of the elasticity indicates that the good is relatively elastic. Since the elasticity is greater than 1, a 1% decrease in price leads to a greater than 1% increase in quantity demanded. Therefore, the best answer is C: 1.

Question 5

A shirt manufacturer sold 10 dozen shirts per day when the price was $4 per shirt but sold 15 dozen shirts per day when the price was $3 per shirt.The price elasticity of demand (using the midpoint method) is:
A.greater than zero but less than 1.
B.equal to 1.
C.greater than 1 but less than 3.
D.greater than 3.

Accepted Answer

The answer of A shirt manufacturer sold 10 dozen shirts...

Question 6

If the price of chocolate-covered peanuts decreases from $1.15 to $0.90 and the quantity demanded does not change, then the price elasticity of demand (using the midpoint method) is:
A)0.5.
B)0.
C)1.
D)0.9.

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Since the quantity demanded does not change, the percentage change in quantity demanded is 0, making the elasticity 0.

Question 7

Figure: The Demand for Shirts   (Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.The price elasticity of demand for the segment EF, using the midpoint method, is:
A)1.3.
B)1.
C)0.7.
D)0.33.

Accepted Answer

The answer of Figure: The Demand for Shirts  ...

Question 8

If the price of chocolate-covered peanuts decreases from $1.10 to $0.95 and the quantity demanded increases from 190 bags to 215 bags, then the price elasticity of demand (using the midpoint method) is:
A)1.25.
B)0.5.
C)0.8.
D)2.

Accepted Answer

The answer of If the price of chocolate-covered peanuts decreases...

Question 9

If the price of chocolate-covered peanuts decreases from $2.00 to $1.55 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:
A)0.
B)0.5.
C)0.8.
D)2.

Accepted Answer

Using the midpoint method, the percentage change in price is (1.55-2.00)/((1.55+2.00)/2) = -0.25/1.775 = -0.1408 or -14.08%. The percentage change in quantity demanded is (220-180)/((220+180)/2) = 40/200 = 0.2 or 20%. The price elasticity of demand is the absolute value of the percentage change in quantity demanded divided by the percentage change in price, or (0.2/0.1408) = 1.42. Since elasticity is a measure of responsiveness, we take the absolute value of elasticity, so the answer is rounded to 0.8.

Question 10

If the price of chocolate-covered peanuts decreases from $1.15 to $1.05 and the quantity demanded increases from 190 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:
A)0.5.
B)1.
C)2.
D)greater than 1.

Accepted Answer

Using the midpoint method formula:

Price elasticity of demand = (change in quantity demanded / average quantity demanded) / (change in price / average price)
= [(220-190)/((220+190)/2)] / [(1.05-1.15)/((1.05+1.15)/2)]
= (30/205) / (-0.1/1.1)
= 1.46

Since the elasticity is greater than 1, it is considered to be elastic. This means that the change in quantity demanded is proportionately greater than the change in price. Therefore, a decrease in price caused the quantity demanded to increase by a larger percentage, indicating that the product is price-sensitive and consumers are responsive to changes in price.

Question 11

The price of notebooks is $5, and at that price consumers demand 12 notebooks.If the price rises to $7, consumers will decrease consumption to 4 notebooks.Using the midpoint formula, what is the price elasticity of demand for notebooks?
A)1/3
B)3
C)1/6
D)6

Accepted Answer

Price elasticity of demand using midpoint formula is:

(P2 - P1) / ((P1 + P2)/2) / (Q2 - Q1) / ((Q2 + Q1)/2)

= ($7-$5) / (($7+$5)/2) / (4-12) / ((4+12)/2)

= 2 / 6 / -4 / 8

= -0.0833

Since the elasticity value is between 0 and -1, demand for notebooks is relatively inelastic. Therefore, a price increase will cause a relatively smaller decrease in the quantity demanded.

Thus, option B is correct.

Question 12

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded does not change, then the price elasticity of demand (using the midpoint method) is:
A)0.
B)0.5.
C)1.
D)2.

Accepted Answer

The answer of If the price of chocolate-covered peanuts decreases...

Question 13

A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie.The price elasticity of demand, using the midpoint method, is:
A.greater than zero but less than 1.
B.equal to 1.
C.greater than 1 but less than 3.
D.greater than 3.

Accepted Answer

The answer of A men's tie store sold an average...

Question 14

A men's tie store sold an average of 30 ties per day when the price was $5 per tie.The same store sold 60 of the same ties per day when the price was $3 per tie.In this case, the price elasticity of demand (using the midpoint method) is:
A.greater than zero but less than 1.
B.equal to 1.
C.greater than 1 but less than 3.
D.greater than 3.

Accepted Answer

The answer of A men's tie store sold an average...

Question 15

Figure: The Demand for Shirts
(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts.The price elasticity of demand for the segment AB, using the midpoint method, is:
A)13.
B)11.
C)0.91.
D)0.1.

Accepted Answer

The answer of Figure: The Demand for Shirts
(Figure: The Demand...

Question 16

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, then the price elasticity of demand (using the midpoint method) is:
A)0.
B)0.5.
C)1.
D)2.

Accepted Answer

The answer of If the price of chocolate-covered peanuts decreases...

Question 17

If the price of chocolate-covered peanuts decreases from $1.15 to $0.90 and the quantity demanded increases from 0 bags to 400 bags, then the price elasticity of demand (using the midpoint method) is:
A)0.5.
B)1.
C)2.
D)greater than 2.

Accepted Answer

The answer of If the price of chocolate-covered peanuts decreases...

Question 18

When the price of pencils decreases from $3 to $1, the quantity demanded increases from 100 to 200 pencils.Using the midpoint method, the price elasticity of demand equals:
A.1/6.
B.1/2.
C.2/3.
D.3/2.

Accepted Answer

The answer of When the price of pencils decreases from...

Question 19

Figure: The Demand Curve for Oil  (Figure: Demand Curve for Oil) Look at the figure The Demand Curve for Oil.The price elasticity of demand between $20 and $21, using the midpoint method, is approximately:
A)0.21.
B)0.49.
C)2.1.
D)4.9.

Accepted Answer

The answer of Figure: The Demand Curve for Oil ...

Question 20

Suppose at a price of $10 the quantity demanded is 100.When the price falls to $8, the quantity demanded increases to 130.The price elasticity of demand between the prices of $10 and $8, using the midpoint method, is approximately:
A)1.17.
B)1.50.
C)0.85.
D)1.00.

Accepted Answer

The midpoint method formula for price elasticity of demand is [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Plugging in the values: [(130 - 100) / (130 + 100) / 2] / [(8 - 10) / (8 + 10) / 2] = 30/115 / -2/9 = 1.17.

Quiz 6: Elasticity

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.The price elasticity of demand for the segment BC, using the midpoint method, is:

If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:

If the price of chocolate-covered peanuts decreases from $1.15 to $0.90 and the quantity demanded does not change, then the price elasticity of demand (using the midpoint method) is:

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.The price elasticity of demand for the segment EF, using the midpoint method, is:

If the price of chocolate-covered peanuts decreases from $1.10 to $0.95 and the quantity demanded increases from 190 bags to 215 bags, then the price elasticity of demand (using the midpoint method) is:

If the price of chocolate-covered peanuts decreases from $2.00 to $1.55 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:

If the price of chocolate-covered peanuts decreases from $1.15 to $1.05 and the quantity demanded increases from 190 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:

The price of notebooks is $5, and at that price consumers demand 12 notebooks.If the price rises to $7, consumers will decrease consumption to 4 notebooks.Using the midpoint formula, what is the price elasticity of demand for notebooks?

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded does not change, then the price elasticity of demand (using the midpoint method) is:

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look at the figure The Demand for Shirts.The price elasticity of demand for the segment AB, using the midpoint method, is:

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, then the price elasticity of demand (using the midpoint method) is:

If the price of chocolate-covered peanuts decreases from $1.15 to $0.90 and the quantity demanded increases from 0 bags to 400 bags, then the price elasticity of demand (using the midpoint method) is:

When the price of pencils decreases from $3 to $1, the quantity demanded increases from 100 to 200 pencils.Using the midpoint method, the price elasticity of demand equals: A.1/6. B.1/2. C.2/3. D.3/2.

Figure: The Demand Curve for Oil (Figure: Demand Curve for Oil) Look at the figure The Demand Curve for Oil.The price elasticity of demand between $20 and $21, using the midpoint method, is approximately:

Suppose at a price of $10 the quantity demanded is 100.When the price falls to $8, the quantity demanded increases to 130.The price elasticity of demand between the prices of $10 and $8, using the midpoint method, is approximately: