FarAwayDrive Inc. has recently increased the price of its golf balls from $40 to $6. In response to this increase in price, sales decreased from 2,200 to 1,800 units. If no other information concerning the demand is available, which of the following is true about the sensitivity of demand (using the ARC or midpoints formula) for FarAwayDrive's golf balls?
A. The ARC-elasticity (midpoints formula) of demand is 4/11 or .364.
B. The ARC-elasticity (midpoints formula) of demand is 2/3 or .667.
C. The ARC-elasticity (midpoints formula) of demand is 2.0.
D. The ARC-elasticity (midpoints formula) of demand is ½ or .50.
Answer: D
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