1. The accompanying table shows the price and yearly quantity sold of ice cream cones on Sidfield Island.
Price of Ice Cream Cones
|
Quantity of Ice Cream Cones Demanded
|
$1
|
3000
|
$2
|
2400
|
$3
|
1600
|
4
|
800
|
- Using the midpoint method (show your work), calculate the price elasticity of demand when the price of an ice cream cone rises from $1 to $2. What does this estimate imply about the price elasticity of demand for ice cream cones?
- Using the midpoint method (show your work), calculate the price elasticity of demand when the price of an ice cream cone rises from $3 to $4. What does this estimate imply about the price elasticity of demand for ice cream cones?
- Notice that the estimates from (a) and (b) above are different. Why do price elasticity of demand estimates change along the demand curve?