Use the following to answer question:
-(Figure: The Demand Curve)Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $6 and $7 is approximately:
A)0.19.
B)1.00.
C)1.86.
D)5.40.

Question

Use the following to answer question: 
-(Figure: The Demand Curve)Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $6 and $7 is approximately:
A)0.19. 
B)1.00. 
C)1.86. 
D)5.40.

Quizplus · Accepted Answer

Using the midpoint formula, the price elasticity of demand between $6 and $7 can be calculated as:
%Δ Quantity Demanded = [(150-100)/((150+100)/2)] *100% = 33.33%
%Δ Price = [(7-6)/((7+6)/2)] * 100% = 8.33%
Price Elasticity of Demand = %Δ Quantity Demanded / %Δ Price
Price Elasticity of Demand = 33.33% / 8.33% = 4
However, the midpoint method takes the absolute value of the elasticity, so the answer is 1/4 or 0.25. Recalling that the demand curve is relatively elastic between $6 and $7, we can estimate that the elasticity is greater than 1, so the answer is closest to C) 1.86.

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