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CODE 3(89) Question 2 Assume that the demand curve is a straight line. If the price per unit of a good rises from $4.50 to

CODE 3(89)

Question 2

Assume that the demand curve is a straight line. If the price per unit of a good rises from

$4.50 to Xl, it is expected that monthly demand will fall from X2 units to 250,000 units. Give your own appropriate XI and X2. What is the point price elasticity of demand when the price is $4.50? What is the arc price elasticity of demand over these ranges of price and output? Is the demand for this good price sensitive?

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