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Question 1

Suppose that a store decreases the price of peanut butter from $4.5 to $3.5. As a result, quantity demanded increases from 190 to 240.

Using the mid-point approach, calculate the percentage change in price.

Make sure that you include a negative sign if necessary.

 

Hint




Question 2

Suppose that a store decreases the price of peanut butter from $4.2 to $3.9. As a result, quantity demanded increases from 200 to 250.

Using the mid-point approach, calculate the percentage change in quantity demanded.

 

Hint




Question 3

Suppose that a store increases the price of peanut butter from $3.6 to $4.5. As a result, quantity demanded decreases from 270 to 190.

Using the mid-point elasticity approach, calculate price elasticity of demand.

Your answer should be expressed in absolute value terms.

 

Hint