When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 copies each month. Using the midpoint method, the price elasticity of demand equals
A) 1.
B) 1/2.
C) 1/3.
D) 2.
E) 3.

Question

Quizplus · Accepted Answer

The midpoint method for calculating price elasticity of demand is:(Q2 - Q1) / ((Q2 + Q1) / 2) * (P1 - P2) / ((P2 + P1) / 2)Plugging in the values given in the question, we get:(1,000,000 - 600,000) / ((1,000,000 + 600,000) / 2) * (5 - 3) / ((5 + 3) / 2)= 400,000 / 800,000 * 2 / 8= 1

When the Price of Cosmopolitan Magazine Decreases from $5 to $3