Elasticity Practice Questions

Elasticity Practice Questions

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Unformatted text preview: Therefore, most patients prefer to use the drug prescribed by their doctor. Also, in this case, the cost of the drug is relatively small. Finally, your need for amoxicillin is a short-run consideration. You want the medicine now so you will feel better! All three of these factors would lead us to believe that the demand for amoxicillin is relatively inelastic. Let’s find out if that intuition is confirmed in the data. The price elasticity of demand using the mid-point method is, (Q2 – Q1) / [(Q1 + Q2) / 2] Ed = (P2 – P1) / [(P1 + P2) / 2] Plugging in the values from the example yields, Ed = (1480 – 1500) / [(1480 + 1500) / 2 ] ($10 - $8) / [($8 + $10) / 2] Simplifying yields, Ed = -20 / 1490 $2 / $9 Therefore the Ed = -...
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This document was uploaded on 02/21/2014 for the course ECN 201 at Rhode Island.

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