This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.
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Here's the solution to your question: Definition: Price elasticity of demand measures the responsiveness of the quantity demanded of a good or service to a change in its price. It indicates how much the quantity demanded changes in percentage terms for a one percent change in price. Given data: Point A: P_1 = 45, Q_1 = 20 Point B: P_2 = 35, Q_2 = 30 Step 1: Calculate the change in quantity and price. The change in quantity ( Q) is Q_2 - Q_1 = 30 - 20 = 10. The change in price ( P) is P_2 - P_1 = 35 - 45 = -10. The slope of the demand curve (( Q)/( P)) is (10)/(-10) = -1. Step 2: Calculate the price elasticity of demand at Point A. The formula for point elasticity of demand is E_d = ( Q)/( P) × (P)/(Q). Using the values at Point A (P_A = 45, Q_A = 20): E_d at A = -1 × (45)/(20) E_d at A = -1 × 2.25 E_d at A = -2.25 Step 3: Calculate the price elasticity of demand at Point B. Using the values at Point B (P_B = 35, Q_B = 30): E_d at B = -1 × (35)/(30) E_d at B = -1 × 1.1666... E_d at B = -1.17 (rounded to two decimal places) Step 4: Calculate the price elasticity of demand between Point A and B (Arc Elasticity). The formula for arc elasticity of demand is: E_d = (Q_2 - Q_1)/(P_2 - P_1) × (P_1 + P_2)/(Q_1 + Q_2) Substitute the given values: E_d arc = (30 - 20)/(35 - 45) × (45 + 35)/(20 + 30) E_d arc = (10)/(-10) × (80)/(50) E_d arc = -1 × 1.6 E_d arc = -1.6 That's 2 down. 3 left today — send the next one.