When the product demand curve is Q = 140 - 10P, and price is decreased from P₁ = $10 to P₂ = $9, the arc price elasticity of demand is:

Question

Quizplus · Accepted Answer

Using the midpoint formula for elasticity, we have:

E = [(Q2-Q1)/((Q1+Q2)/2)] / [(P2-P1)/((P1+P2)/2)]

Where:
Q1 = 140 - 10P1 = 140 - 10(10) = 40
Q2 = 140 - 10P2 = 140 - 10(9) = 50
P1 = $10
P2 = $9

Plugging in these values, we get:

E = [(50-40)/((40+50)/2)] / [(9-10)/((9+10)/2)] = -10

Therefore, the arc price elasticity of demand is -10. Option D is incorrect because we need to consider absolute value of elasticity.

When the Product Demand Curve Is Q = 140 -