Using the midpoint formula, what would be the price elasticity of demand for a product if its quantity demanded fell from 6,000 to 4,000 units after its price rose from $6 to $10?

Question

Quizplus · Accepted Answer

The midpoint formula for price elasticity of demand is [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)], where Q1 and Q2 are the initial and final quantities, and P1 and P2 are the initial and final prices. Plugging in the given values: [(4000 - 6000) / ((4000 + 6000) / 2)] / [($10 - $6) / (($10 + $6) / 2)] = (-2000 / 5000) / (4 / 8) = -0.4 / 0.5 = -0.8. The negative sign indicates the direction of the change (price up, quantity down), so the absolute value, 0.8, is the elasticity.

Using the Midpoint Formula, What Would Be the Price Elasticity