Use the image to answer the question. What is the elasticity of demand for peanut butter when the price changes from $2.00 to $0.40 as shown by this supply and demand curve?

Question

(1 point)
Responses

0.004
0.004

0.2
0.2

5
5

0.5

Answer 1

To calculate the price elasticity of demand (PED), we use the formula:

\[ \text{PED} = \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Price}} \]

Since I do not have access to the actual image or data from the supply and demand curve, I cannot compute the exact values for you. However, I can guide you on how to perform the calculation:

1. Determine the initial and new prices:

   • Initial Price (P1) = $2.00
   • New Price (P2) = $0.40

2. Calculate the percentage change in price: \[ \text{Percentage Change in Price} = \frac{P2 - P1}{P1} \times 100 = \frac{0.40 - 2.00}{2.00} \times 100 \]

3. Determine the initial and new quantities demanded: You would need to refer to the graph for the quantity demanded at these prices.

4. Calculate the percentage change in quantity demanded: \[ \text{Percentage Change in Quantity Demanded} = \frac{Q2 - Q1}{Q1} \times 100 \] Where Q1 is the initial quantity demanded and Q2 is the new quantity demanded.

5. Substitute these percentage changes into the PED formula to obtain the elasticity.

After you do these calculations, you can match the result to the options provided: 0.004, 0.2, 5, or 0.5 to find the correct answer.

Please perform the calculations with the specific quantity values from your graph to determine the elasticity of demand for peanut butter.