Suppose the price of potato chips decreases from $1.45 to $1.25 and,as a result,the quantity of potato chips demanded increases from 2,000 to 2,200.Using the midpoint method,the price elasticity of demand for potato chips in the given price range is
A) 2.00.
B) 1.55.
C) 1.00.
D) 0.64.

Question

Quizplus · Accepted Answer

The midpoint method formula for price elasticity of demand is [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Plugging in the values: [(2200 - 2000) / (2200 + 2000) / 2] / [(1.25 - 1.45) / (1.25 + 1.45) / 2] = 0.64.

Suppose the Price of Potato Chips Decreases from $1