If at a price of $10, a vendor sells 5 units of a product and at a price of $8, 6 units are sold, then, using the midpoint formula, the demand for this good is inelastic.

Question

Quizplus · Accepted Answer

The midpoint formula is used to calculate the price elasticity of demand, which measures the responsiveness of quantity demanded to changes in price. If the result of the calculation is less than 1, the demand is considered inelastic, meaning that changes in price have a relatively small effect on the quantity demanded.

Using the midpoint formula with the given information, we get:

Price elasticity of demand = ((6-5)/((6+5)/2)) / ((8-10)/((8+10)/2))
= (1/5.5) / (-2/9) = -0.327

Since the result is less than 1, the demand for this good is inelastic. Therefore, the answer is A.

If at a Price of $10, a Vendor Sells 5