Question

In: Economics

True or False: The value of the price elasticity of demand is equal to the slope of the demand curve.

4. Elastic, inelastic, and unit-elastic demand 

The following graph shows the demand for a good

image.png

For each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit elastic, or inelastic. 

image.png

True or False: The value of the price elasticity of demand is equal to the slope of the demand curve. 

Solutions

Expert Solution

Solution:

1)

Between W and X

1.29

Elastic

Between Y and Z

0.78

Inelastic

Between X and Y

1

Unitary Elastic

2) False

Working:

Percentage change in quantity:

W and X: 8 - 20 / [(8+20)/2] * 100 = -85.71%

X and Y: 20 - 28 / [(20 +28) / 2] * 100 = -33.33%

Y and Z = 28 - 56 / [(28 + 56)/2] * 100 = -66.67%

Percentage change in quantity:

W and X:140 - 70 / [(140 + 70) / 2] * 100 = 66.67%

X and Y: 70 - 50 / [(70 + 50) / 2] * 100 = 33.33%

Y and Z: 50 - 20 / [(50+20) / 2] * 100 = 85.71%

EOD:

W and X: 85.71% / 66.67% = 1.29 (Elastic)

X and Y: 33.33%/ 33.33% = 1 (Unitary elastic)

Y and Z = 66.67% / 85.71 = 0.78 (Inelastic)

Demand is inelastic if the price elasticity of demand is less than 1; Demand is elastic if the price elasticity of demand is more than 1; Demand is unitary elastic if the price elasticity of demand equals 1


Related Solutions

True or False: The value of the price elasticity of demand is not equal to the slope of the demand curve.
Elastic, inelastic, and unit-elastic demand The following graph shows the demand for a good. For each of the regions, use the midpoint method to identify whether the demand for this good is elastic, (approximately) unit elastic, or inelastic. Region Elastic Inelastic Unit Elastic Between X and Y Between W and X Between V and Z True or False: The value of the price elasticity of demand is not equal to the slope of the demand curve. True False
1) The absolute value of price elasticity of demand for a linear demand curve (constant slope)...
1) The absolute value of price elasticity of demand for a linear demand curve (constant slope) follows the pattern (moving from high prices to low prices along the demand curve) a. constant. b. increases. c. decreases. d. has no pattern (of changes). 2) Given a demand function P=20–0.2Q. The own-price elasticity at (Q=25, P=15) is a. -1. b. -2. c. -3. d. -4. 3) A market has only two consumers: A and B. Consumer A has a demand function given...
The price elasticity of demand equals the slope of the demand curve. t/f
can you help me with these microeconomics t/f questions.The price elasticity of demand equals the slope of the demand curve. t/fthe larger the portion of a persons total budget spent on a good, the more inelastic the demand for the good. t/fif the demand for farm products is income elastic; that would mean that farm products were necessity. t/ffor hockey memorabilia fans, the puck with which Sidney Crosby scored the Golden Goal in 2010 is perfectly elastic In supply. t/fif...
1. T/F/Explain Price elasticity of demand is measured using the slope of the demand curve. 2....
1. T/F/Explain Price elasticity of demand is measured using the slope of the demand curve. 2. Our company, Slim ‘N Trim, Inc. sells pants for $40 a pair. After a successful year, you decide to try raising the price to $60. Your observation: sales drop from 50 pairs to 40. What is your price elasticity of demand calculated using the midpoint formula? 3. After observing the value of your elasticity, does increasing your price increase, decrease, or have no effect...
Demand is inelastic if the price elasticity of demand is numerically (absolute value terms)   Equal to...
Demand is inelastic if the price elasticity of demand is numerically (absolute value terms)   Equal to 1   Equal to 0   Less than 1   all of the above   none of the above In the long run a company that produces and sells laundry detergent increases all of its inputs by 25% and its output rises from 1,250 units to 2,000 units. For this range of output, the laundry detergent company exhibits increasing returns to scale. constant returns to scale. decreasing returns...
True or False please explain a. The price elasticity of demand for an individual firm is...
True or False please explain a. The price elasticity of demand for an individual firm is equal to the price elasticity of demand for the industry divided by the number of firms in that industry. b. It is impossible to estimate a demand function using an econometric model, since the “price–quantity” pairs of points that we observe are always contaminated by other factors, such as whether, income in that community, prices of related d, Since for a company such as...
True or False 1.The Cross-Price elasticity of demand for good X is -2, if its demand...
True or False 1.The Cross-Price elasticity of demand for good X is -2, if its demand changes from 100 units to 300 units, because of an increase in Price of Good Y from $1 to $2? 2.If the Demand for a good is inelastic, we can say that, as Price decreases, the Total Revenue will decrease. 3.If the demand for a good rises, when income falls, the good is an inferior good. 4.Because of the law of supply, we can...
true or false For an elastic demand curve, a 1% change in price results in a...
true or false For an elastic demand curve, a 1% change in price results in a greater than 1% change in the quantity demanded. When Colgate offers several different types of toothpaste to consumers who live in a geographically isolated community, this is an example of “captive product pricing.” An example of Optional product pricing would be the optional features when purchasing a new car. A society with three manufacturers, three customers, and no distributors will require nine exchanges in...
What is the relationship--if there is one--between the price elasticity of demand and the slope of...
What is the relationship--if there is one--between the price elasticity of demand and the slope of the demand curve
At equilibrium, the slope of the indifference curve is   (a ) equal to the slope of...
At equilibrium, the slope of the indifference curve is   (a ) equal to the slope of the budget line , (b) greater than the slope of the budget line, (c) smaller than the slope of the budget line or can either be equal, greater or smaller than the slope of the budget line.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT