Author Question: The price of cabbage rises from 0.20 per pound to 0.30 per pound. The quantity of cabbage demanded ... (Read 110 times)

craiczarry · **on:** Jun 29, 2018

The price of cabbage rises from 0.20 per pound to 0.30 per pound. The quantity of cabbage demanded falls from 800 pounds per week to 600 pounds per week. Use the midpoint formula to calculate the price elasticity of demand for cabbage.

Is the demand elastic, inelastic, or unit elastic?

Question 2

When your budget line is just tangent to your indifference curve, you are at the point on the budget line that you least prefer.

Indicate whether the statement is true or false

livaneabi · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

percentage change in quantity demanded = 600 800/700 = -200/700 = -28.6
percentage change in price = 0.30 - 0.20/0.15 = 0.10/0.15 = 66.7
price elasticity of demand = -28.6/66.7 = -0.43

Since the absolute value of the price elasticity of demand is less than one, the demand is inelastic.

Answer to Question 2

FALSE