Suppose the Price of Flour Increases from $0

question 106

Essay

Suppose the price of flour increases from $0.80 to $1.00 a pound and the quantity demanded decreases from 100 pounds to 95 pounds. Using the midpoint method, what is the price elasticity of demand for flour? Is the demand for flour elastic or inelastic?

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Definitions:

Average Total Cost

Represents the total costs of production (both fixed and variable) divided by the quantity of output produced, indicating the cost per unit of output.

Pure Monopoly

A market structure where a single seller completely dominates the market for a product that has no close substitutes, allowing it to set prices without direct competition.

Profit-maximizing

A strategy or approach aimed at identifying the optimum level of output and price that generates the maximum profit.

Short Run

An economic phase where at least one factor, like the size of a facility, remains constant and unalterable.