Table 5-2

-Refer to Table 5-2.Using the midpoint method,if the price falls from $80 to $60,the absolute value of the price elasticity of demand is
A) 20.
B) 10.
C) 2.33.
D) 0.43.

Question

Table 5-2
 
-Refer to Table 5-2.Using the midpoint method,if the price falls from $80 to $60,the absolute value of the price elasticity of demand is
A) 20. 
B) 10. 
C) 2.33. 
D) 0.43.

Quizplus · Accepted Answer

Using the midpoint method, the percentage change in quantity demanded is (250-150)/200 = 0.5. The percentage change in price is (60-80)/70 = -0.29.

Using the formula for price elasticity of demand:

E = (percentage change in quantity demanded) / (percentage change in price) 
E = 0.5 / (-0.29) 
E ≈ -1.72

Taking the absolute value, the elasticity is approximately 1.72, which is closer to 2.33 than 0.43 or 10. Therefore, the best choice is C.

Table 5-2 -Refer to Table 5-2.Using the Midpoint Method,if the Price Falls