Exhibit 5-9 Supply and demand curves for good X

-As shown in Exhibit 5-9, the price elasticity of demand for good X between points E and B is:
A) 3/7 = 0.43.
B) 7/3 = 2.33.
C) 1/2 = 0.50.
D) 1.

Question

Exhibit 5-9 Supply and demand curves for good X
​ 
-As shown in Exhibit 5-9, the price elasticity of demand for good X between points E and B is:
A) 3/7 = 0.43. 
B) 7/3 = 2.33. 
C) 1/2 = 0.50. 
D) 1.

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Between points E and B, the price decreases by 3 units (from 10 to 7) and the quantity demanded increases by 7 units (from 21 to 28). Therefore, the price elasticity of demand is 7/3 = 2.33.

Exhibit 5-9 Supply and Demand Curves for Good X