Given the graph over that shows the demand also for an excellent. Use the midpoint technique to identify if the demand for this great is elastic, (approximately) unit elastic, or inelastic.
You are watching: 4. elastic, inelastic, and unit-elastic demand the following graph shows the demand for a good.
Sol: To calculate price elasticity of demand also for, we use midpoint approach, wbelow we usage the average both initial and also new quantities and prices for figuring the percentage readjust. This is referred to as the Midpoint Method for Elasticity, and also is represented in the following equations
Midpoint method for elasticity = <(Q2 – Q1)/ (Q2 + Q1)/2> /<(P2 – P1)/ ( P2 + P1)/2>
Thus, price elasticity of demand also between points X and also Y = (% change in quantity demanded) / (% adjust in price)
% adjust in quantity in between points X and also Y = <(36 – 28)/ (36 + 28)/2>
= 8 / 32 * 100 = 25
% adjust in Price = <(35 – 45)/ (35 + 45)/2>
=(-10)/ 40) *100 = (-25)
Hence, price elasticity of demand
= 25 /(-25) = (-1)
Note: the negative sign can be ignored as price and quantity demanded is inversely related.
Due to the fact that...
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