QQuestionAnatomy and Physiology
QuestionAnatomy and Physiology
# Question 10 (1 point)
When the price of peanut oil falls from $\$ 5$ to $\$ 4$ per gallon, quantity demanded increases from 8 to 10 gallons per month. Based on this information, the absolute value of the price elasticity of demand using the midpoint method is
$\square 1.25$ and demand is relatively inelastic.
$\square 1.0$ and demand is unit elastic.
$\square 1.25$ and demand is relatively elastic.
$\square 0.8$ and demand is relatively elastic.
## Question 11 (1 point)
Suppose that you are the owner of a dairy mart. You receive revenues from sales of soda and potato chips. If the cross-price elasticity of demand between the two products is - 0.87 and you lower the price of soda, then demand for potato chips
$\square$ is indeterminable.
$\square$ does not change.
$\square$ increases.
$\square$ decreases.
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Answer
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Step 1:: Calculate the midpoint of the initial and final prices of peanut oil.
\text{Midpoint} &= \frac{\$5 + \$4}{2} \
The midpoint formula is given by: Using the given information, we have: \begin{align*} &= \$4.50 \end{align*}
Step 2:: Calculate the midpoint of the initial and final quantities demanded.
\text{Midpoint} &= \frac{8 + 10}{2} \
Using the given information, we have: \begin{align*} &= 9 \end{align*}
Step 3:: Calculate the price elasticity of demand using the midpoint method.
&= -\frac{2}{9} \times -\frac{\$4.50}{-\$1} \
The formula for price elasticity of demand using the midpoint method is given by: Where: \begin{align*} \end{align*} Using the given information, we have: \begin{align*} &= \boxed{1.25} \end{align*}
Step 4:: Determine whether demand is elastic or inelastic.
$\square 1.25$ and demand is relatively elastic.
If the price elasticity of demand is greater than 1, then demand is elastic. If it is less than 1, then demand is inelastic. In this case, the price elasticity of demand is 1.25, so demand is relatively elastic. Therefore, the correct answer is:
Step 5:: Analyze the cross-price elasticity of demand between soda and potato chips.
The cross-price elasticity of demand is given by: In this case, the cross-price elasticity of demand between soda and potato chips is - 0.87. This means that the two products are complements, since a decrease in the price of soda leads to a decrease in the quantity demanded of potato chips.
Step 6:: Determine the effect on demand for potato chips when the price of soda is lowered.
$\square$ decreases.
Since soda and potato chips are complements, a decrease in the price of soda will lead to an increase in the quantity demanded of soda, but a decrease in the quantity demanded of potato chips. Therefore, the correct answer is:
Final Answer
Question 10: $\square 1.25$ and demand is relatively elastic. Question 11: $\square$ decreases.
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