To determine the elasticity of demand, we need to use the formula:
Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)
Given that the price changes from $2.00 to $0.40, and assuming the quantity demanded is changing proportionately, we can calculate the percentage change in quantity demanded as:
% Change in Quantity Demanded = ((2 - 0.40) / 2) * 100 = 160%
The percentage change in price is:
% Change in Price = ((0.40 - 2) / 2) * 100 = -80%
Now we can plug these values into the formula:
Elasticity of Demand = (160% / -80%) = -2
The elasticity of demand for peanut butter based on this supply and demand curve is 2. However, since elasticity measures the responsiveness of demand to price changes, it should be positive. Therefore, the correct answer is 2.
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?
(1 point)
0.2
0.5
0.004
5
1 answer
1 answer