Question: Given the demand function = 10/p -2p +20 and suppose that increases from 1 to 2. What are the proportional and percentage changes in price

Given the demand function = 10/p -2p +20 and suppose that increases from 1 to 2.

  • What are the proportional and percentage changes in price and quantity?
  • Find the arc elasticity of demand for the given increase in price
  • Find the point elasticity of demand when = .
  • What is the error that arises if we use the point elasticity as an approximation to the arc elasticity?
  • If were to increase from 1 to 3, what would be the error that arises if we used the point elasticity as an approximation to the arc elasticity? Compare that to the size of the error from part (d). What is the reason behind the difference in error sizes?
  • Sketch the demand function indicating how the solutions to (a)-(c) may be measured geometrically.

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