Calculation Of Price Elasticity Of Demand
Question
The accompanying table shows the price and yearly quantity sold of ice cream cones on Sidfield Island.
|
Price of Ice Cream Cones |
Quantity of Ice Cream Cones Demanded |
|
$1 |
3000 |
|
$2 |
2400 |
|
$3 |
1600 |
|
$4 |
800 |
a. Using the midpoint method (show your work), calculate the price elasticity of demand when the price of an ice cream cone rises from $1 to $2. What does this estimate imply about the price elasticity of demand for ice cream cones
b. Using the midpoint method (show your work), calculate the price elasticity of demand when the price of an ice cream cone rises from $3 to $4. What does this estimate imply about the price elasticity of demand for ice cream cones?
c. Notice that the estimates from (a) and (b) above are different. Why do price elasticity of demand estimates change along the demand curve?
Summary
The question belongs to Economics and it discusses about using midpoint method for calculating the price elasticity of demand for the price of a product.
Total Word Count 127