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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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