Use the following to answer question:
-(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $1.75 and $1.50?
A)0.42
B)1.50
C)1.86
D)0.08

Question

Use the following to answer question: 
-(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $1.75 and $1.50?
A)0.42 
B)1.50 
C)1.86 
D)0.08

Quizplus · Accepted Answer

Using the midpoint formula, we get:
Price elasticity of demand = (Q2 - Q1) / [(Q2 + Q1) / 2] / (P2 - P1) / [(P2 + P1) / 2]
= (-200 - (-100)) / [(-200 + (-100)) / 2] / (1.75 - 1.50) / [(1.75 + 1.50) / 2]
= -1.5 / -0.125
= 12/8. Thus, the elasticity is 1.5 x (8/12) = 1.5 x 0.67 = 1.005 or 1.01 (approximately). Therefore, the answer is C, 1.86.

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