Question

6.” The table above gives the demand schedule for peas. Between point A and point B. the price elasticity of demand equals”0.110.50.229.09

Answer 1

Let's suppose we have a price PA for point A, and a quantity QA, similar for point B, price A and quantity B.

We can apply the formula for PED (Price Elasticity of Demand) between A and B, in a generic way the formula is

$PED=\frac{Q_f-Q_i}{Q_f+Q_i}\cdot\frac{P_f+P_i}{P_f-P_i}$

Where the index "f" means final and the index "i" means initial, then it's the final price, initial price, and so on.

But we want between point A and B, so point B is the final price and quantity, and A is the initial price and quantity, then

$PED=\frac{Q_B-Q_A}{Q_B+Q_A}\cdot\frac{P_B+P_A}{P_B-P_A}$

Looking the table we can see that QA = 0, PA = 10, and QB = 4, PB = 8, then let's put it in our formula.

$\begin{gathered} PED=\frac{4-0_{}}{4_{}+0}\cdot\frac{8_{}+10}{8-10_{}} \\ \\ PED=-\frac{4}{4}\cdot\frac{18}{2} \\ \\ PED=-9 \end{gathered}$

Therefore, the price elasticity of demands equals -9.