Suppose the price of Twinkies decreases from $1.45 to $1.25 and,as a result,the quantity of Twinkies demanded increases from 2,000 to 2,200.Using the midpoint method,the price elasticity of demand for Twinkies 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 Twinkies Decreases from $1