Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between $10 and $8, by the midpoint method, is approximately:
A) 1.17.
B) 1.50.
C) 0.85.
D) 1.00.

Question

Quizplus · Accepted Answer

The midpoint method formula for price elasticity of demand is [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Plugging in the values: [(130 - 100) / (130 + 100) / 2] / [(8 - 10) / (8 + 10) / 2] = 30/115 / -2/9 = 0.26 / -0.22 = -1.17 (absolute value is 1.17).

Suppose at $10 the Quantity Demanded Is 100