At a price of $200.00, a store can sell 24 watches a day. At a price of $180.00 the store can sell 33 watches a day. Using the midpoint formula, the price elasticity of demand is:

Question

Quizplus · Accepted Answer

The midpoint formula for price elasticity of demand is:Ed = (% Change in Quantity Demanded) / (% Change in Price)% Change in Quantity Demanded = (33 - 24) / ((33 + 24) / 2) = 0.25% Change in Price = (180 - 200) / ((180 + 200) / 2) = -0.1Ed = 0.25 / -0.1 = -2.5Therefore, the price elasticity of demand is -2.5, which is closest to choice B) 3.00.

At a Price of $200