Table 6-6

-Refer to Table 6-6.Based on the data in the table and using the midpoint formula, between a price of $9.99 and $14.99, the price elasticity of demand for books is

Question

Table 6-6
 
-Refer to Table 6-6.Based on the data in the table and using the midpoint formula, between a price of $9.99 and $14.99, the price elasticity of demand for books is

Quizplus · Accepted Answer

Using the midpoint formula:

% change in quantity demanded = [(Q2 - Q1) / ((Q1 + Q2) / 2)] * 100

% change in price = [(P2 - P1) / ((P1 + P2) / 2)] * 100

Given:

Q1 = 50,000 
Q2 = 40,000 
P1 = $9.99 
P2 = $14.99

% change in quantity demanded = [(40,000 - 50,000) / ((40,000 + 50,000) / 2)] * 100 = -20%

% change in price = [(14.99 - 9.99) / ((14.99 + 9.99) / 2)] * 100 = 40%

Price elasticity of demand = % change in quantity demanded / % change in price = -20% / 40% = -0.5

Since the absolute value of elasticity is greater than 1, demand is elastic.

Therefore, the price elasticity of demand for books between a price of $9.99 and $14.99 is -1.35.

Table 6-6 -Refer to Table 6-6.Based on the Data in the Table