Suppose that as the price of Y falls from$2.00 to $1.90, the quantity of Y demanded increases from110 to 118. Then the absolute value of the price elasticity (using the midpoint formula)is approximately
A)4.
B)2.09.
C)1.37.
D)3.94.

Question

Quizplus · Accepted Answer

The midpoint formula for price elasticity of demand is [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Plugging in the values: [(118 - 110) / (118 + 110) / 2] / [(1.90 - 2.00) / (1.90 + 2.00) / 2] = 1.37.

Suppose That as the Price of Y Falls From$2