-Refer to Figure 5.1.Using the initial-value method,if the price of a hamburger is increased from $6 to $8,the price elasticity of demand equals
A) 0.7.
B) 1.0.
C) 2.0.
D) 5.0.

Question

-Refer to Figure 5.1.Using the initial-value method,if the price of a hamburger is increased from $6 to $8,the price elasticity of demand equals
A) 0.7. 
B) 1.0. 
C) 2.0. 
D) 5.0.

Quizplus · Accepted Answer

The price elasticity of demand using the initial-value method is calculated as the percentage change in quantity demanded divided by the percentage change in price. If the price increases from $6 to $8, the percentage change in price is (8-6)/6 = 1/3 or approximately 33.33%. Assuming the quantity demanded changes accordingly, the elasticity can be calculated to be 1.0, indicating unitary elasticity.