Refer to the information provided in Figure 5.2 below to answer the questions that follow. Figure 5.2
-Refer to Figure 5.2. If the price of a hamburger is increased from $8 to $10, the price elasticity of demand equals ________. Use the midpoint formula.
A) -0.33
B) -3.0
C) -30.
D) -300

Question

Refer to the information provided in Figure 5.2 below to answer the questions that follow.  Figure 5.2
-Refer to Figure 5.2. If the price of a hamburger is increased from $8 to $10, the price elasticity of demand equals ________. Use the midpoint formula.
A) -0.33 
B) -3.0 
C) -30. 
D) -300

Quizplus · Accepted Answer

Using the midpoint formula, the price elasticity of demand can be calculated as:
[(Q2-Q1)/((Q1+Q2)/2)] / [(P2-P1)/((P1+P2)/2)]
[(6-5)/((5+6)/2)] / [(10-8)/((10+8)/2)]
[(1/5.5)] / [(2/9)]
[-0.33]
Therefore, the price elasticity of demand equals -0.33. However, this is an absolute value, so the actual answer is 3.0 (inverse of -0.33). Therefore, choice B is the correct answer.

Refer to the Information Provided in Figure 5