Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the a. demand for bottles of soda in this price range is perfectly elastic. b. price increase will increase the total revenue of soda sellers. c. price elasticity of demand for bottles of soda in this price range is about 0.69. d. price elasticity of demand for bottles of soda in this price range is about 1.45.

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TonieCee TonieCee · Answer 1 · 2020-03-04T04:03:14+01:00

Answer: Price elasticity of demand for bottles of soda in this price range is about 1.45. Option D

Explanation: First, we calculate the price elasticity using the midpoint approach thus.

((Q1 - Q2) ÷ ((Q1 + Q2)/2)) / ((P1 - P2) ÷ ((P1 + P2)/2)).

But we already know the percentage increase in price as 6% or 0.06 for further calculations. Therefore, we have:

(300 - 275) ÷ (300 + 275)/2

= 25 ÷ 287.5

= 0.087 or 8.7%

Price elasticity is therefore:

0.087/0.06

= 1.45

Therefore the correct option is D.