Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula, what is the price elasticity of demand (in absolute value)over this range?
A)0.003
B)0.41
C)2.43
D)4

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: [(600 - 800) / (600 + 800) / 2] / [(4.50 - 4) / (4.50 + 4) / 2] = (-200 / 700) / (0.50 / 4.25) = -0.2857 / 0.1176 = 2.43 (in absolute value).

Suppose That When the Price Per Ream of Recycled Printer