When the price of a bracelet was $25 each,the jewelry shop sold 20 per month.When it raised the price to $35 each,it sold 14 per month.Using the midpoint method,the price elasticity of demand for bracelets is about
A) 1.66.
B) 1.06.
C) 0.94.
D) 0.60.

Question

Quizplus · Accepted Answer

Using the midpoint method, we have:

Price = (25 + 35)/2 = 30
Quantity = (20 + 14)/2 = 17

Using the formula for price elasticity of demand:

%ΔQ/%ΔP = [(Q2-Q1)/((Q2+Q1)/2)] / [(P2-P1)/((P2+P1)/2)]
%ΔQ/%ΔP = [(14-20)/((14+20)/2)] / [(35-25)/((35+25)/2)]

%ΔQ/%ΔP = [-6/17] / [10/30]
%ΔQ/%ΔP = [-0.3529] / [0.3333]
%ΔQ/%ΔP = -1.058

The absolute value of price elasticity of demand is 1.058 or approximately 1.06,which means that the bracelets are relatively elastic, because the value is greater than 1. Therefore, a change in price leads to a more than proportionate change in quantity demanded.

When the Price of a Bracelet Was $25 Each,the Jewelry