Suppose the Price of a Good Falls from $4

question 5

Essay

Suppose the price of a good falls from $4.95 to $3.85, and the quantity demanded changes from 77 units to 99 units. Calculate the price elasticity of demand using the midpoint formula, and indicate whether demand is elastic, inelastic, or unit-elastic.

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Definitions:

Balance

The difference between the total credits and total debits in an account, or the stability between opposing forces.

Gold Exchange Standard

A monetary system where countries hold reserves in a currency that is convertible into gold but do not exchange currency for gold themselves; instead, the currency can be exchanged for another currency that is convertible into gold at a fixed rate.

Current Account

A component of a country's balance of payments that measures the trade balance, net primary income, and net secondary income with foreign entities.

Deficit

The amount by which expenses or costs exceed income or revenues, commonly associated with governmental budgeting.