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Slav-nsk [51]
3 years ago
9

If the price elasticity of demand for used cars priced between $3,000 and $5,000 is –1.2 (using the mid-point method), what will

be the percent change in quantity demanded when the price of a used car falls from $5,000 to $3,000?
Business
1 answer:
azamat3 years ago
6 0

Answer:

the decrease in price of used cars from $5000 to $3000 will lead to a rise in the demand of used cars by 60%

Explanation:

Mid-point method

The midpoint formula for calculating elasticity calculates change in quantity demanded and divides it by the change in the the price

The original formula is

(Q2-Q1) / (Q2-Q1)/2   / (P2-P1)  / (P2-P1/2)

Q2 is new Quantity

Q1 is old quantity

P2 is new price

P1 is old price

Since we already have the Price elasticity of demand as -1.2

the formula changes to

Percentage Change in QUantity = Price Elasticity of demand x ( (P2-P1)  / (P2-P1/2)

= -1.2 x (P2-P1)  / (P2-P1/2)

= -1.2 x (3,000-5000)  / (5000-3000/2)

-1.2 x (-2000/4000) x 100

= 60%

Therefore, the decrease in price of used cars from $5000 to $3000 will lead to a rise in the demand of used cars by 60%

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<h3>What is meant by the term control standard?</h3>

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Answer:

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Explanation:

Note: This question is not complete as some figures are omitted. The full question is therefore presented first before answering the question as follows:

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Which of the following correctly describes the immediate effect of this transaction on the money​ supply?

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The explanation to the answer is now provided as follows:

This is an example of Open market operations (OMO).

Open market operations (OMO) is a monetary policy strategy in which the central bank such as the Federal Reserve sells or purchases government securities in order to implement a particular monetary policy.

When the central bank sells government securities on the open market, it aims to reduce the money supply by the worth of the securities. This is called a contractionary monetary policy.

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If firms and households form their expectations about inflation by looking at past inflation, this form of expectations formatio
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Answer:

B) adaptive

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