The figure above shows the supply curve for roses.
-Suppose a decrease in supply raises the price from $4.00 to $5.50 and decreases the quantity demanded from 2,000 to 1,500.Using the midpoint method,the elasticity of demand equals
A) 2.10.
B) 1.11.
C) 0.90.
D) 0.72.
E) None of the above answers is correct.

Question

The figure above shows the supply curve for roses.
-Suppose a decrease in supply raises the price from $4.00 to $5.50 and decreases the quantity demanded from 2,000 to 1,500.Using the midpoint method,the elasticity of demand equals
A) 2.10. 
B) 1.11. 
C) 0.90. 
D) 0.72. 
E) None of the above answers is correct.

Quizplus · Accepted Answer

The midpoint method formula for elasticity of demand is [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Plugging in the values: [(1500 - 2000) / (1500 + 2000) / 2] / [(5.50 - 4.00) / (5.50 + 4.00) / 2] = -0.90.

The Figure Above Shows the Supply Curve for Roses