A linear demand function is given in Figure 4.66. Economists compute elasticity of
Chapter 4, Problem 23(choose chapter or problem)
A linear demand function is given in Figure 4.66. Economists compute elasticity of demand E for any quantity q0 using the formula E = d1/d2, where d1 and d2 are the vertical distances shown in Figure 4.66. (a) Explain why this formula works. (b) Determine the prices, p, at which (i) E > 1 (ii) E < 1 (iii) E = 1
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