Answer:
The data of the question is this:
YEAR Gosum Berries Price Per
Demand Barrel
107 700 $70
108 600 $84
Explanation:
The Mid-Point Formula to calculate the Price Elasticity of Demand is:
[ (Q2 - Q1) / (Q2 + Q1) / 2 ] this divided by [ (P2 - P1) / (P2 + P1) / 2 ]
where Q is demand, and P is price
Now, we plug the amounts into the formulas:
[ (600 - 700) / (600 + 700) / 2 ] = -0.038
[ (84 - 70) / (84 + 70) / 2 ] = 0.045
-0.038 / 0.045 = -0.844
Thus, the elasticity of demand for gosum berries, using the midpoint method, is -0.844, however, economists use absolute values for elasticities, so -0.844 becomes 0.844
An elasticity of demand of 0.844, which is less than one, indicates inelastic demand. This means that the quantity demanded for gosum berries falls less in proportion to raises in price.
In order worlds, the coefficient of elasticity of demand measures the price sensitivity of consumer demand for a particular good or service.
