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Blossom, Inc., sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is:________.a. -0.33 and elastic.b. -3.0 and elastic.c. -0.33 and inelastic .d. -3.0 and inelastic.

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segehood

Answer:

C. - 0.33 and inelastic

Explanation:

Using the mid point formula

Elasticity of coefficient = [Q2 - Q1]/ [Q2 + Q1]/2 ÷ [P2 - P1]/ [P2 + P1]/2

Therefore, given that

Q1 = 500

Q2 = 460

P1 = 7

P2 = 9

thus

= 460 - 500/ (460 + 500)/2 ÷ 9 - 7/(9 + 7)/ 2

= -40/480 ÷ 2/8

= - 0.08333 ÷ 0.25

= - 0.33

It is inelastic because it's less than 1. Remember that, because demand falls with increases in price, elasticities are always negative.