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At a price of $19.50 per pound, people buy 84 pounds of snake meat. At a price of $20.50 per pound, people buy 76 pounds of snake meat. What is the arc elasticity of demand for snake meat in this price range?

Answer :

Final answer:

The arc elasticity of demand is -2, indicating that the demand for snake meat is highly elastic in this price range.

Explanation:

The arc elasticity of demand measures the responsiveness of demand to a change in price along a specific arc of the demand curve. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, the price of snake meat is changing from $19.50/pound to $20.50/pound, resulting in a decrease in quantity demanded from 84 pounds to 76 pounds.



To calculate the arc elasticity of demand, we can use the formula:



Arc Elasticity = ((Q2 - Q1) / ((Q2 + Q1) / 2)) / ((P2 - P1) / ((P1 + P2) / 2))



Plugging in the values, we get:



Arc Elasticity = ((76 - 84) / ((76 + 84) / 2)) / ((20.50 - 19.50) / ((19.50 + 20.50) / 2))



Arc Elasticity = (-8 / 80) / (1 / 20)



Arc Elasticity = -0.1 / 0.05



Arc Elasticity = -2

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