Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 4 percent,the number of candy bars demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the
A) demand for candy bars in this price range is elastic.
B) demand for candy bars in this price range is inelastic.
C) demand for candy bars in this price range is unit elastic.
D) price elasticity of demand for candy bars in this price range is 0.

Question

Quizplus · Accepted Answer

The midpoint approach to calculating the price elasticity of demand is given by:```Ed = (Q2 - Q1) / ((Q2 + Q1) / 2) * (P2 - P1) / ((P2 + P1) / 2)```where:* Q1 is the initial quantity demanded* Q2 is the new quantity demanded* P1 is the initial price* P2 is the new priceIn this case, we have:* Q1 = 50* Q2 = 46* P1 = P (the initial price)* P2 = 1.04P (the new price, which is 4% higher than the initial price)Plugging these values into the formula, we get:```Ed = (46 - 50) / ((46 + 50) / 2) * (1.04P - P) / ((1.04P + P) / 2)``````Ed = -4 / 48 * 0.04P / 1.02P``````Ed = -0.0833```Since the price elasticity of demand is negative, the demand for candy bars in this price range is elastic.

Suppose That 50 Candy Bars Are Demanded at a Particular