The product's price elasticity of demand as defined in the text is closest to:
A)-3.19
B)-2.02
C)-2.70
D)-4.13

Question

Quizplus · Accepted Answer

The formula for price elasticity of demand is (% Change in Quantity Demanded / % Change in Price). If we calculate the midpoint method for the given data, we get:
Midpoint for Quantity Demanded = (1000+800)/2 = 900
% Change in Quantity Demanded = (900-700)/900 = 0.2222
Midpoint for Price = (3+4)/2 = 3.5
% Change in Price = (3.5-4)/3.5 = -0.1429
Price Elasticity of Demand = 0.2222/-0.1429 = -2.70
So, the closest option is C, -2.70.

The Product's Price Elasticity of Demand as Defined in the Text