Question

suppose a seafood outlet decreased the price of tuna from $12 per pound to $8 per pound. as a result, the quantity demanded of tuna by their customers increased from 100 pounds per day to 150 pounds per day. using the midpoint method (use at least 3 decimal points in your answer and all intermediate calculations. make sure to choose the correct sign for changes in quantity and price as well as for the elasticity.): 1. the percentage change in price is select % 2. the percentage change in quantity is select % 3. the implied price elasticity of demand is select 4. this means that the demand for tuna is select

Explanation:

Step1: Calculate percentage - change in price

The mid - point formula for percentage change in price is $\frac{P_2 - P_1}{\frac{P_2+P_1}{2}}\times100\%$. Here, $P_1 = 12$ and $P_2 = 8$.
$\frac{8 - 12}{\frac{8 + 12}{2}}\times100\%=\frac{-4}{10}\times100\%=- 40\%$

Step2: Calculate percentage - change in quantity

The mid - point formula for percentage change in quantity is $\frac{Q_2 - Q_1}{\frac{Q_2+Q_1}{2}}\times100\%$. Here, $Q_1 = 100$ and $Q_2 = 150$.
$\frac{150 - 100}{\frac{150+100}{2}}\times100\%=\frac{50}{125}\times100\% = 40\%$

Step3: Calculate price elasticity of demand

The price elasticity of demand ($E_d$) is given by the formula $E_d=\frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}}$.
$E_d=\frac{40\%}{-40\%}=-1$

Answer:

1. -40
2. 40
3. -1
4. Unit - elastic (since $|E_d| = 1$)