Use the following to answer questions:
Figure: The Demand for e-Books
-(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. What is the price elasticity of demand (by the midpoint method) when the price decreases from $6 to $4?
A) 0.55
B) 0.5
C) 1
D) 0.67

Question

Use the following to answer questions:
Figure: The Demand for e-Books 
-(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. What is the price elasticity of demand (by the midpoint method) when the price decreases from $6 to $4?
A) 0.55 
B) 0.5 
C) 1 
D) 0.67

Quizplus · Accepted Answer

The midpoint method calculates elasticity as the percentage change in quantity demanded divided by the percentage change in price. If the quantity demanded increases from Q1 to Q2 when the price decreases from $6 to $4, the elasticity is calculated as [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(6 - 4) / ((6 + 4) / 2)]. The result is 1, indicating unitary elasticity.

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