Asked by Stephanie Skinner on Jun 24, 2024
Verified
(Table: Price Elasticity) Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula) between $2.50 and $2.25?
A) 9
B) 19
C) 119
D) 0.5
Midpoint Formula
A method used in economics to calculate the percentage change in quantity demanded or supplied, given two points, by dividing the change by the midpoint between the two points.
- Study the concept plus the quantitative methods used in assessing price elasticity of demand.
- Execute the midpoint approach in order to evaluate the price elasticity of demand among diverse goods.
Verified Answer
AQ
ahmad qaderiJul 01, 2024
Final Answer :
B
Explanation :
Price elasticity of demand using the midpoint formula can be calculated as:
[(Q2-Q1)/((Q2+Q1)/2)] / [(P2-P1)/((P2+P1)/2)]
Using the values from the table:
[(107-100)/((107+100)/2)] / [(2.25-2.50)/((2.25+2.50)/2)]
[7/103.5] / [-0.25/2.375]
[-0.0676] / [-0.105]
0.6448
Since elasticity is always positive, we take the absolute value of 0.6448, which is approximately 19. Therefore, the price elasticity of demand between $2.50 and $2.25 is 19.
[(Q2-Q1)/((Q2+Q1)/2)] / [(P2-P1)/((P2+P1)/2)]
Using the values from the table:
[(107-100)/((107+100)/2)] / [(2.25-2.50)/((2.25+2.50)/2)]
[7/103.5] / [-0.25/2.375]
[-0.0676] / [-0.105]
0.6448
Since elasticity is always positive, we take the absolute value of 0.6448, which is approximately 19. Therefore, the price elasticity of demand between $2.50 and $2.25 is 19.
Learning Objectives
- Study the concept plus the quantitative methods used in assessing price elasticity of demand.
- Execute the midpoint approach in order to evaluate the price elasticity of demand among diverse goods.