The​ short-run price elasticity of demand for tires is 0.90. The​ mid-point formula was used for this calculation.

Question

Part 2
If an increase in the price of petroleum​ (used in producing​ tires) causes the market prices of tires to rise from ​$50

to ​$60
​,
by what percentage would you expect the quantity of tires demanded to​ change?---​%.

​(Your answer should have one decimal​ place, and should not have a negative​ sign).

Answer 1

To calculate the percentage change in quantity demanded using the mid-point formula, you can use the following formula:

Percentage Change in Quantity Demanded = (Elasticity / (1 + Elasticity)) * (Percentage Change in Price)

Given that the short-run price elasticity of demand for tires is 0.90 and the price of tires increases from $50 to $60, the percentage change in price is:

Percentage Change in Price = ((New Price - Old Price) / Old Price) * 100
= (($60 - $50) / $50) * 100
= 20%

Substituting the values into the formula, we have:

Percentage Change in Quantity Demanded = (0.90 / (1 + 0.90)) * 20%
= (0.90 / 1.90) * 20%
≈ 0.4737 * 20%
≈ 9.47%

Therefore, you would expect the quantity of tires demanded to change by approximately 9.47%.

Answer 2

wrong answer

Answer 3

Apologies for the error in the previous response. Let me calculate the correct answer.

Using the midpoint formula, we can calculate the percentage change in quantity demanded as:

Percentage Change in Quantity Demanded = (Elasticity / (1 + Elasticity)) * (Percentage Change in Price)

Given that the price elasticity of demand for tires is 0.90 and the price of tires increases from $50 to $60, the percentage change in price is:

Percentage Change in Price = ((New Price - Old Price) / Old Price) * 100
= (($60 - $50) / $50) * 100
= 20%

Substituting the values into the formula, we have:

Percentage Change in Quantity Demanded = (0.90 / (1 + 0.90)) * 20%
= (0.90 / 1.90) * 20%
≈ 0.4737 * 20%
≈ 9.47%

Therefore, you would expect the quantity of tires demanded to change by approximately 9.47%.