Using the Midpoint Method,the Price Elasticity of Demand for a Good

question 48

Multiple Choice

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 2.Which of the following events is consistent with a 0.1 percent increase in the price of the good?

• A)The quantity of the good demanded decreases from 250 to 150.
• B)The quantity of the good demanded decreases from 200 to 100.
• C)The quantity of the good demanded decreases by 0.05 percent.
• D)The quantity of the good demanded decreases by 0.2 percent.

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Definitions:

Passive Approach

A strategy or method where actions and decisions are reactive rather than proactive, often characterized by minimal or no intervention.

Government Act

A piece of legislation that has been passed by a legislative body, such as a parliament or congress, and formally enacted into law.

Phillips Curve

A theoretical inverse relationship between rates of unemployment and corresponding rates of inflation, suggesting that inflation rises as unemployment falls, and vice versa.

Aggregate Demand

The aggregate demand for every good and service within a certain economy or market.