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Use the data in the table below to answer the following question
Use the data in the table below to answer the following question.
| Price per Unit | Quantity Demanded per Unit of Time |
|---|---|
| $20 | 12 |
| 18 | 17 |
| 16 | 20 |
| 14 | 24 |
| 12 | 30 |
| 10 | 36 |
| 8 | 40 |
| 6 | 44 |
| 4 | 48 |
The price elasticity of demand (based on the midpoint formula) when price increases from $10 to $12 is
a. 0.33.
b. 3.29.
c. 1.37.
d. 1.
e. None of the Above
Expert Solution
Price Elasticity of Demand = ((old quantity - new quantity)/(old quantity + new quantity)/2)/((old price - new price)/(old price + new price)/2)
= ((36-30)/33)/((10-12)/11)
= (6/33)/(-2/11)
= (2/11)/(-2/11)
=-1
The answer is none of the above. The elasticity of the demand function is usually negative.
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