Zumba classes sell all 20 participant spots at a price of $4.50 each. When the instructor raised the prices to $5.50, 10 people attended the class. From the midpoint method, the price elasticity of demand for Zumba is:
A) -0.50.
B) -3.33.
C) -2.50.
D) 0.20.
E) -0.20.

Question

Quizplus · Accepted Answer

Using the midpoint method formula to calculate the price elasticity of demand:

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

Where:
Q1 = 20
Q2 = 10
P1 = $4.50
P2 = $5.50

E = ((10-20)/15)/((5.5-4.5)/5) = -3.33

Therefore, the price elasticity of demand for Zumba is -3.33, which means that for every 1% increase in price, there will be a 3.33% decrease in quantity demanded.

Zumba Classes Sell All 20 Participant Spots at a Price