6 Questions
When calculating arc elasticity, what do economists do with the minus sign?
They drop the minus sign and use the absolute value.
What is the advantage of using the midpoint formula for percentage change in a variable?
It provides consistent elasticity values when price moves in either direction.
What does Ep = Q2 - Q1 (P2 + P1) * (Q2 + Q1) (P2 - P1) represent when calculating arc elasticity?
Elasticity of demand
In which direction does price move to get consistent elasticity values when using the midpoint formula?
In either direction
If P1= 500, Q1= 100, P2= 400, and Q2= 150, what is the elasticity of demand?
1.8
What does the slope of a demand curve indicate about demand elasticity?
Steeper slope means less elastic demand.
Test your understanding of how consumers' expectations regarding future prices, income, and supply conditions influence current demand in the field of business economics.
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