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The given data set is Product price Quantity demanded 5 1 4 2 3 3 2 4 1 5 The demand curve is given below: Demand Curve 6 5 Price 4 3 2 1 0 0 1 2 3 4 5 6 Quantity The price elasticity of demand is the ratio of the percentage change in quantity to the percentage change in price. The midpoint formula for Elasticity of demand is Ed = Change in quantity/(sum of quantities/2) Change in price/(sum of prices/2) For the price change $5 to $4, the elasticity demand is given by, Ed = [(2-1)/(3/2)]/[(5-4)/(9/2)] = (1/1.5)/(1/4.5) = 4.5/1.5 = 3 For the price change $4 to $3, the elasticity demand is given by, Ed = [(3-2)/(5/2)]/[(4-3)/(7/2)] = (1/2.5)/(1/3.5) = 3.5/2.5 = 1.4 For the price change $3 to $2, the elasticity demand is given by, Ed = [(4-3)/(7/2)]/[(3-2)/(5/2)] = (1/3.5)/(1/2.5) = 2.5/3.5 = 0.7143 For the price change $2 to $1, the elasticity demand is given by, Ed = [(5-4)/(9/2)]/[(2-1)/(3/2)] = (1/4.5)/(1/1.5) = 1.5/4.5 = 0.3333 Thus the Elasticities of demand from top to bottom are 3; 1.4; 0.7143; 0.3333. Slope does not measure elasticity. This demand curve has a constant slope of -1 (= -1/1), but elasticity declines as we move down the curve. When the initial price is high and initial quantity is low, a unit change in price is a low percentage while a unit change in quantity is a high percentage change. The percentage change in quantity exceeds the percentage change in price, making demand elastic. When the initial price is low and initial quantity is high, a unit change in price is a high percentage change while a unit change in quantity is a low percentage change. The percentage change in quantity is less than the percentage change in price, making demand inelastic.