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Answer the question on the basis of the following demand schedule.

Price Quantity Demanded
$6 1
5 2
4 3
3 4
2 5
1 6

The price elasticity of demand is unit-elastic (based on the midpoint formula):_______

a. throughout the entire price range because the slope of the demand curve is constant.
b. in the $4 to $3 price range only.
c. over the entire $3 to $1 price range.
d. over the entire $6 to $4 price range.

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Answer:

The price elasticity of demand is unit-elastic (based on the midpoint formula):_______

b. in the $4 to $3 price range only.

Explanation:

The midpoint formula in this example embraces the price from $4 to $3 and the quantity from 3 to 4 in order to calculate the elasticity of demand.  The elasticity of demand is the responsiveness of demand to price changes.  In this instance, the price reduced by 25% and the quantity demanded increased by 33%.  This shows that price determines the quantity demand.  Therefore, demand for the product or service is very elastic, meaning that demand changes more as price changes.