The short-run price elasticity of demand for tires is 0.90. The mid-point formula was used for this calculation.
Part 2
If an increase in the price of petroleum (used in producing tires) causes the market prices of tires to rise from $50
to $60
,
by what percentage would you expect the quantity of tires demanded to change?---%.
(Your answer should have one decimal place, and should not have a negative sign).
To calculate the percentage change in quantity demanded using the mid-point formula, you can use the following formula:
Percentage Change in Quantity Demanded = (Elasticity / (1 + Elasticity)) * (Percentage Change in Price)
Given that the short-run price elasticity of demand for tires is 0.90 and the price of tires increases from $50 to $60, the percentage change in price is:
Percentage Change in Price = ((New Price - Old Price) / Old Price) * 100
= (($60 - $50) / $50) * 100
= 20%
Substituting the values into the formula, we have:
Percentage Change in Quantity Demanded = (0.90 / (1 + 0.90)) * 20%
= (0.90 / 1.90) * 20%
≈ 0.4737 * 20%
≈ 9.47%
Therefore, you would expect the quantity of tires demanded to change by approximately 9.47%.
wrong answer
Apologies for the error in the previous response. Let me calculate the correct answer.
Using the midpoint formula, we can calculate the percentage change in quantity demanded as:
Percentage Change in Quantity Demanded = (Elasticity / (1 + Elasticity)) * (Percentage Change in Price)
Given that the price elasticity of demand for tires is 0.90 and the price of tires increases from $50 to $60, the percentage change in price is:
Percentage Change in Price = ((New Price - Old Price) / Old Price) * 100
= (($60 - $50) / $50) * 100
= 20%
Substituting the values into the formula, we have:
Percentage Change in Quantity Demanded = (0.90 / (1 + 0.90)) * 20%
= (0.90 / 1.90) * 20%
≈ 0.4737 * 20%
≈ 9.47%
Therefore, you would expect the quantity of tires demanded to change by approximately 9.47%.
To find the percentage change in quantity demanded, we use the formula:
% Change in Quantity Demanded = Price Elasticity of Demand * % Change in Price
Given:
Price Elasticity of Demand = 0.90
Initial Price = $50
Final Price = $60
% Change in Price = ((Final Price - Initial Price) / Initial Price) * 100
= ((60 - 50) / 50) * 100
= (10 / 50) * 100
= 20%
% Change in Quantity Demanded = 0.90 * 20
= 18%
Therefore, we would expect the quantity of tires demanded to change by 18%.
To calculate the percentage change in the quantity of tires demanded, we need to use the midpoint formula.
The midpoint formula is:
Percentage change = [(New Value - Old Value) / ((New Value + Old Value) / 2)] * 100
In this case, the old value is $50 and the new value is $60. So let's substitute these values into the formula:
Percentage change = [($60 - $50) / (($60 + $50) / 2)] * 100
Simplifying the calculation:
Percentage change = [(10) / ((110) / 2)] * 100
Percentage change = [(10) / (55)] * 100
Percentage change = 18.18%
Therefore, we would expect the quantity of tires demanded to change by approximately 18.18% (rounded to one decimal place), in response to the increase in the price of petroleum.