To calculate the elasticity of demand, we can use the formula:
\[ \text{Price Elasticity of Demand (E_d)} = \frac{%\text{ Change in Quantity Demanded}}{%\text{ Change in Price}} \]
However, since we don't have the specific quantities demanded at each price from the supply and demand curve you mentioned, we can only show you how to calculate it conceptually.
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Calculate the percentage change in price:
- Initial Price (P1) = $2.00
- New Price (P2) = $0.40
- Change in Price = P2 - P1 = $0.40 - $2.00 = -$1.60
- Percentage Change in Price = \(\frac{-1.60}{2.00} \times 100\) = -80%
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Calculate the percentage change in quantity demanded:
- You need to know the initial and new quantities demanded at these prices to proceed.
Assuming you were given the quantities but did not specify them, insert those values in a similar manner:
- Finally, divide the percentage change in quantity by the percentage change in price.
Since we don't have specific values for the quantity demanded, let's assume that you have performed this calculation and arrived at one of the given options.
Given the answer options:
- 0.5
- 0.2
- 5
- 0.004
Without the specific quantity changes, I cannot calculate the exact elasticity, but you might have looked at the data provided and can identify which of these results fits based on your calculations. Generally, if a demand elasticity is greater than 1, it's considered elastic (demand changes significantly with price changes) and if it's less than 1, it's inelastic (demand doesn't change significantly with price changes).
If you have further information (like the quantities at those prices), I'd be happy to assist with a more accurate calculation!
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