? ?In the picture above the point A2 is half way between the origin and the quantity intercept of the demand curve. The price elasticity at point "1" is
A)0
B)between -? and -1
C)-1
D)between -1 and 0

Question

?  ?In the picture above the point A2 is half way between the origin and the quantity intercept of the demand curve. The price elasticity at point "1" is
A)0 
B)between -? and -1 
C)-1 
D)between -1 and 0

Quizplus · Accepted Answer

Since point A2 is halfway between the origin and the quantity intercept of the demand curve, we know that the price at A2 is exactly half of the intercept price. Therefore, price elasticity at point "1" can be calculated using the midpoint formula: 
E = (Q2-Q1)/[(Q2+Q1)/2]/[(P2-P1)/[(P2+P1)/2]]
As the demand curve is a straight line passing through the origin, the quantity intercept is equal to the inverse of the slope of the demand curve. Therefore, the price elasticity at point "1" can be calculated as:
E = (60-50)/[(60+50)/2]/[(4-5)/[(4+5)/2]] = -5/-7 = 5/7
Since the elasticity is greater than 1, the demand is elastic. Hence, the best choice is B, which states that the elasticity is between -? and -1.

? ?In the Picture Above the Point A2 Is