Suppose that,as the price of product H falls from $5 to $4,the quantity of H demanded increases from 2,000 to 6,000 units.In this case,what is the elasticity of demand,using the midpoint formula?
A).9
B).4
C)4.5
D)1.6
E)3.0

Question

Quizplus · Accepted Answer

Using the midpoint formula, the price elasticity of demand can be calculated as:

Elasticity = ((Q2 - Q1) / ((Q2 + Q1) / 2)) / ((P2 - P1) / ((P2 + P1) / 2))

Plugging in the values, we get:

Elasticity = ((6000 - 2000) / ((6000 + 2000) / 2)) / (($4 - $5) / (($4 + $5) / 2))
Elasticity = 4.5

Therefore, the elasticity of demand is 4.5. The closest option is C) 4.5.

Suppose That,as the Price of Product H Falls from $5