Exhibit 5-1 Demand curve

In Exhibit 5-1, between points b and c, the price elasticity of demand measures
A) 0.425.
B) 1.571.
C) 0.143
D) 0.636.

Question

Exhibit 5-1 Demand curve

In Exhibit 5-1, between points b and c, the price elasticity of demand measures
A) 0.425. 
B) 1.571. 
C) 0.143 
D) 0.636.

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the ratio of the percentage change in quantity demanded to the percentage change in price. Between points b and c, the quantity demanded changes from 60 to 80, a 33.3% increase, while the price changes from $8 to $5, a 37.5% decrease. Therefore, the price elasticity of demand is (33.3/37.5), which equals 0.636.

Exhibit 5-1 Demand Curve