Question

As the price of gummy bears rises from $2. 60 to $3 , what are the price elasticities of demand of sugar-free gummy bears and of ordinary gummy bears? use the midpoint method and specify answers to one decimal place.

Answer 1

The price elasticities of demand of sugar-free gummy bears and of ordinary gummy bears is -0.8 and -2.3 respectively.

How to calculate price elasticity

Change in price of gummy bears = $2. 60 to $3

Elasticity of demand of sugar-free gummy bears =

[(273-379 / (273+379)/2] ÷ [(3.00-2.60)/(3.00+2.60) / 2]

= [-18/166] / [0.4/2.8]

= -0.10843373493975 / 0.14285714285714

= - 0.75903614457826

Approximately, -0.8

Elasticity of demand of regular gummy bears:

Sugar free = [(273-379) / (273+379)/2] ÷ (3.00 +2.60) / 2]

= [-106/326] / [0.4/2.8]

= -0.32515337423312 / 0.14285714285714

= -2.2760736196318

Approximately, -2.3

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