Question

Given a demand curve of Q=100−2P.

1.Calculate the price at which demand is unit elastic. This price is___ (Round your answer to two decimal places.)

2. Find the quantity where demand is unit elastic. This quantity is___ (Round your answer to two decimal places.)

3.At quantities lower than the value found in Part 2, the demand curve is

Choose one:

A. perfectly elastic.

B. relatively elastic.

C. relatively inelastic.

D. perfectly inelastic.

4.At quantities higher than the value found in Part 2, the demand curve is

Choose one:

A. relatively inelastic.

B. perfectly elastic.

C. perfectly inelastic.

D. relatively elastic.

Answer 1

1) Q= 100–2P

Price Elasticity of Demand=( ∆Q/∆P)×(P/Q)

–1= –2×( P/100–2P)

100–2P= 2P

P= 25

The price is 25 at which demand is unit Elastic.

2)P= 50–0.5Q

Price Elasticity of Demand=( ∆Q/∆P)×(P/Q)

–1= –2×(50–0.5Q)/Q

Q= 100–Q

Q= 50.

The quantity where demand is unit elastic is 50.

3) At quantity is lower than the value found in part 2 the demand curve is relatively elastic.

Hence, option B is correct.

4) At quantities higher than the value found in part 2, demand curve is relatively inelastic.

Hans option A is correct