Use the following to answer questions:
Figure: The Demand for e-Books
-(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. What is the price elasticity of demand (by the midpoint method) when the price increases from $6 to $8?
A) 0.55
B) 0.5
C) 2.33
D) 0.67

Question

Use the following to answer questions:
Figure: The Demand for e-Books 
-(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. What is the price elasticity of demand (by the midpoint method) when the price increases from $6 to $8?
A) 0.55 
B) 0.5 
C) 2.33 
D) 0.67

Quizplus · Accepted Answer

The midpoint method for calculating price elasticity of demand is: [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Assuming the quantities demanded at $6 and $8 are Q1 and Q2 respectively, the calculation results in an elasticity of 2.33.

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