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Question: andnbspcircle onethe following graph represents the market demand for paper...

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Circle one

The following graph represents the market demand for paper towel. Select the correct answer from each dropdown menu.

Assessed2Graph2.png

Important note: when calculating a price elasticity of demand, if you arrive at an answer that is a negative number, you should ignore the minus sign and choose the corresponding answer that is a positive number.

(a) Using the midpoint method, the elasticity of demand between points A and B is equal to

i) 1.00

ii) 1.33

iii) 2.50

iv) 6.00

 Demand is (elsatic, inelsatic, unit elastic) between points A and B. This is consistent with the fact that total expenditure, or total revenue, in the paper towel market (increases, decreases, stays the same) as we move from point a to point b.

(b)Using the midpoint method, the elasticity of demand between points B and C is

i) 0.4

ii) 0.75

iii) 1.00

iv) 1.33

Demand is (elsatic, inelsatic, unit elastic)  between points B and C. This is consistent with the fact that total expenditure (or total revenue) in the paper towel market (increases, decreases, stays the same) as we move from point b to point c.

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