-Refer to Exhibit 5.2, Graph C. Using midpoint formula calculate elasticity of demand if price was reduced from $150 to $100.
A) 0.1.
B) 0.3.
C) 6.
D) 2.5.

Question

-Refer to Exhibit 5.2, Graph C. Using midpoint formula calculate elasticity of demand if price was reduced from $150 to $100.
A) 0.1. 
B) 0.3. 
C) 6. 
D) 2.5.

Quizplus · Accepted Answer

The midpoint formula for elasticity of demand is [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Without specific quantities (Q1 and Q2) from Graph C, we can't calculate the exact numbers. However, assuming the quantities change proportionally, an elasticity of 2.5 suggests a relatively elastic demand, where a price decrease leads to a proportionally larger increase in quantity demanded. This is a hypothetical answer since the exact quantities are not provided.