Question

Below is a given demand schedule for cans of soda:

price	quantity
5	0
4	2
3	4
2	6
1	8
0	10

a. Draw the corresponding demand curve on a graph.

b. Calculate the slope between all consecutive points on the demand schedule and add them as a new column in the table above.

c. Calculate the arc (mid-point) elasticities between all consecutive points on the demand schedule and add them as a new column in the table above.

d. What portions of the demand curve is elastic? What portion on the demand curve is unit elastic? What portion of the demand curve is inelastic? Mark these portions on the graph.

Answer 1

a)\

b)

Quantity	Price	Change in Quantity	Change in Price	Slope (Change in price / Change in quantity)
0	5	-	-	-
2	4	2	-1	-0.5
4	3	2	-1	-0.5
6	2	2	-1	-0.5
8	1	2	-1	-0.5
10	0	2	-1	-0.5

c)

Quantity	Price	New Quantity (Q2) - Old Quantity (Q1)	[(Q2 + Q1) / 2]	New Price (P2) - Old Price (P1)	[(P2 + P1) /2]	Mid Point method {[Q2 - Q1) / [(Q2 + Q1)/2]} / {[P2 - P1) / [(P2 + P1)/2]}
0	5	-	-	-	-	-
2	4	2	1	-1	4.5	-9.00
4	3	2	3	-1	3.5	-2.33
6	2	2	5	-1	2.5	-1.00
8	1	2	7	-1	1.5	-0.43
10	0	2	9	-1	0.5	-0.11

d)