Question

Consider the market for a breakfast cereal. The​ cereal's price is initially ​$3.003.00 and 7070 thousand boxes are demanded per week. The company that produces the cereal is considering raising the price to ​$3.503.50. At that​ price, consumers would demand 6565 thousand boxes of cereal per week. What is the price elasticity of demandLOADING... between these prices using the midpoint formulaLOADING...​? The price elasticity of demand using the midpoint formula is . ​(Enter your response as a real number rounded to two decimal​ places.)

Answer 1

Answer:

Price elasticity of demand=0.48

Explanation:

The price elasticity of demand is defined as the change in demand for a particular good or service due to a change in price. The price elasticity of demand can be expressed using the mid-point formula below;

price elasticity of demand using the midpoint formula=[(Q2-Q1)/{(Q2+Q1)/2}]/(P2-P1)/{(P2+P1)/2}

where;

Q1=initial demand

Q2=final demand

P1=initial price

P2=final price

In our case;

Q1=7,070

Q2=6,565

P1=$3.003.00

P2=$3.503.30

replacing;

[(6565-7070)/{(6565+7070)/2}]/(3.503.50-3.003/{(3.503.50+3.003)/2}

(-505/6817.5)/(0.5005/3.25325)

0.074074/0.153846=-0.48141

Price elasticity of demand=0.48