00:01
Okay, so in this question, we want to know the price elasticity of demand when, in the first case, income is $5 ,000.
00:10
So we look at the first column, or the second column, where quantity demanded under income equals $5 ,000.
00:17
And we're talking about going from the point where demand is $8 to $16.
00:26
And that's $8 to $16.
00:36
So, look, i'm just going to pull those numbers out of the chart.
00:39
So, first of all, the elasticity of demand is equal to percentage change in quantity divided by percentage change in price, which is just the change in quantity divided by quantity divided by change in price over price.
01:02
So, we can take the denominator and flip it up here.
01:06
So it looks like that.
01:08
So when we go from $8 to $16, the demand at eight, well, let's do the, yeah, well, let's do the dq.
01:18
So at eight, the quantity demanded is 10.
01:22
And at 16, the quantity demanded is six.
01:25
So the quantity goes down by four.
01:30
And the midpoint method means you take the average of the two quantities so again we went from 10 to 6 so the average of that is 8 and so that's the q so this this is q here this is dq and then for the price well the price is going from 8 to 16 so well we have p here oh well the b again is the midpoint between 8 and 16 so that would be 12 divided by the change in p which is we going from 8 to 16 so that's 8 so this looks like it's gonna be 12 over 16 i'm just dividing here by 4 so and divide it both sides by and there's a minus sign here but when we talk about elasticity it's the absolute value so divide 12 by 4 you you have three and 16 by four.
02:32
So that's 0 .75 and that answer is b.
02:37
Okay, now we wanna do the same thing when the price is 16...