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pantera1 [17]
3 years ago
9

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 unit

s, then, according to the midpoint formula, the value of price elasticity of demand (ignoring absolute value) is___________.
Business
1 answer:
Ksenya-84 [330]3 years ago
7 0

Answer:

-0.33

Explanation:

The calculation of the price elasticity of demand using mid point formula is shown below:

= (change in quantity demanded ÷ average of quantity demanded) ÷ (percentage change in price ÷ average of price)  

where,  

Change in quantity demanded is

= Q2 - Q1

= 80 units - 100 units

= -20 units

And, the average of quantity demanded would be

= (80 units + 100 units) ÷ 2

= 90 units

Change in price is

= P2 - P1

= $2 - $1

= 1

And, the average of the price is

= ($2 + $1) ÷ 2

= 1.5

So, after solving this, the price elasticity of demand is -0.33

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An external competitor to Construction (from another island) is offering to build the new homes for $1300 each. Here are facts a
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a. The minimum transfer price (per home) that Construction would be willing to accept would be $1,270

b. The maximum transfer price (per home) Island Evaluations would be willing to accept would be $1,300

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Figures in $

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