Using the midpoint formula, what would be the price elasticity of demand for a gallbladder operation if the number of operations fell from 7000 to 4000 per week after its price increased from $6000 to $15 000?
A) 0.254.
B) 0.636.
C) 0.801.
D) 1.25.

Question

Quizplus · Accepted Answer

Using the midpoint formula:
Price elasticity of demand = [(Q2-Q1)/((Q2+Q1)/2)] / [(P2-P1)/((P2+P1)/2)]
= [(4000-7000)/((4000+7000)/2)] / [(15000-6000)/((15000+6000)/2)]
= -0.636
(Note that the negative sign indicates that demand is elastic, meaning that the percentage change in quantity demanded is greater than the percentage change in price.)

Using the Midpoint Formula, What Would Be the Price Elasticity