The mid-point method of calculating price elasticity of demand:
A) measures the percentage changes relative to a point midway between two points on a demand curve.
B) measures the absolute change relative to a point midway between two points on a demand curve.
C) measures the percentage change relative to a point midway between demand and supply.
D) None of these is true.

Question

Quizplus · Accepted Answer

The mid-point method of calculating price elasticity of demand measures the percentage changes in quantity demanded relative to a point midway between two points on a demand curve, as opposed to using the absolute change between two points. This method provides a more accurate and unbiased estimate of price elasticity, especially when there are large changes in price and quantity demanded.

The Mid-Point Method of Calculating Price Elasticity of Demand