When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about
A) 0.55.
B) 10.
C) 2.
D) 1.83.

Question

Quizplus · Accepted Answer

The midpoint method calculates elasticity as the percentage change in quantity demanded divided by the percentage change in price. The percentage change in quantity is (100-120)/((100+120)/2) = -0.1818, and the percentage change in price is (7-5)/((7+5)/2) = 0.3333. The elasticity is |-0.1818/0.3333| = 0.545, approximately 0.55.

When the Price of a Good Is $5, the Quantity