Consider the market for a breakfast cereal. The? cereal's price is initially ?$3.50 and 65 thousand...

Consider the market for a breakfast cereal. The? cereal's price is initially ?$3.50 and 65 thousand boxes are demanded per week.

The company that produces the cereal is considering raising the price to ?$4.00. At that? price, consumers would demand 60 thousand boxes of cereal per week.

What is the price elasticity of demand between these prices using the midpoint formula??

The price elasticity of demand using the midpoint formula is _____ (Enter your response as a real number rounded to two decimal? places.)

Solutions

Expert Solution

Price elasticity of demand = [(Q1 – Q0)/(Q0+ Q1)/2]/ [(P1 – P0)/ (P0 + P1)/2]

= [(60 – 65)/ (65 + 60)/2]/ [(4 – 3.5)/ (4 + 3.5)/2]

= [-5/ 62.5]/ [0.5/ 3.75]

= - 0.08/ .1333

= - 0.6

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ekkarill92 answered 1 year ago

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