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the table below shows the weekly demand for machine screws at the local hardware store. demand for machine screws price (dollars per pack) quantity (packs of 100 screws) $5.00 0 4.50 60 4.00 120 3.50 180 3.00 240 2.50 300 2.00 360 1.50 420 1.00 480 0.50 540 0.00 600 instructions: round your answers to two decimal places. if you are entering a negative number include a minus sign. a. using the starting point method, what is the price elasticity of demand from a price of $4.50 to a price of $4.00 per pack of 100 screws? b. using the starting point method, what is the price elasticity of demand from a price of $2.50 to a price of $2.00 per pack of 100 screws? c. using the starting point method, what is the price elasticity of demand from a price of $1.00 to a price of $0.50 per pack of 100 screws?



Answer :

Part a: The elasticity of demand is -21.6

Part b: The elasticity of demand is -1.13

Part c: The elasticity of demand is -0.27

The responsiveness of a percentage change in the quantity required owing to a percentage change in price is measured by the price elasticity of demand. At various locations along the demand curve, the price elasticity of demand might vary.

Part a:

At a price of $4.5 quantity demanded of the screw is 25 packets and at a price of $4 quantity demanded of the screw is 85 packets of screws.

The elasticity of demand(Ed) is calculated as follows:

Ed = Change in quantity demanded/Change in price*Price/Quantity

(85−25)/($4−$4.5)×$4.5/25

=−21.6

Part b:

At a price of $2.5 quantity demanded of the screw is 265 packets and at a price of $2 quantity demanded of the screw is 325 packets of screws.

The elasticity of demand(Ed) is calculated as follows:

Ed = Change in quantity demanded/Change in price*Price/Quantity

(325−265)/($2−$2.5)×$2.5/265

= -1.13

Part c:

At a price of $1 quantity demanded of the screw is 445 packets and at a price of $0.5 quantity demanded of the screw is 505 packets of screws.

The elasticity of demand(Ed) is calculated as follows:

Ed = Change in quantity demanded/Change in price*Price/Quantity

(505−445)/($0.5−$1)×$1/445

= -0.27

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