Which of the following formulas is used to calculate the "point" elasticity of demand?
A) Point elasticity of demand = [(Q₂ − Q₁)/(Q₂)]/[(P₂ − P₁)/(P₂)]
B) Point elasticity of demand = [(Q₂ + Q₁)/(Q₂/2)]/[(P₂ + P₁)/(P₂/2)]
C) Point elasticity of demand = [(Q₂ − Q₁)/(Q₂ + Q₁)/2]/[(P₂ − P₁)/(P₂ + P₁)/2]
D) Point elasticity of demand = [(Q₁ − Q₂)/(Q₂ + Q₁)]/[(P₁ − P₂)/(P₂ + P₁)]

Question

Quizplus · Accepted Answer

The formula to calculate point elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. Using the midpoint method, the formula becomes [(Q₂ − Q₁)/[(Q₂ + Q₁)/2]]/[(P₂ − P₁)/[(P₂ + P₁)/2]]. Simplifying it further gives us the formula [(Q₂ − Q₁)/(Q₂)]/[(P₂ − P₁)/(P₂)], which is option A. Option B has incorrect calculations as there is no midpoint calculation for the quantity and price. Option C has mid-point calculations in the denominator, but the formula for the numerator is incorrect. Option D also has the incorrect formula and mid-point calculations.

Which of the Following Formulas Is Used to Calculate the "Point