When the price of a textbook is $100, 60 copies are demanded; and when the price of that textbook goes up to $120, 30 copies are demanded. In the price range between $100 and $120, the demand for the textbook is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.

Question

Quizplus · Accepted Answer

We can use the midpoint formula to calculate the price elasticity of demand:
Price elasticity of demand = [(Q2-Q1)/(Q1+Q2)/2] / [(P2-P1)/(P1+P2)/2]

Substituting the given values, we get:
Price elasticity of demand = [(30-60)/(30+60)/2] / [(120-100)/(100+120)/2]
= -30/45 / 20/110
= -0.89

Since the value of price elasticity is greater than 1, we can conclude that the demand for the textbook is elastic. This means that a change in price will lead to a relatively larger change in the quantity demanded.

When the Price of a Textbook Is $100, 60 Copies