Table 5-5
-Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately
A)0.07.
B)0.18.
C)0.41.
D)2.45.

Question

Table 5-5 
-Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately
A)0.07. 
B)0.18. 
C)0.41. 
D)2.45.

Quizplus · Accepted Answer

Using the midpoint method, the formula for calculating price elasticity of demand is [(Q2-Q1)/((Q1+Q2)/2)]/[(P2-P1)/((P1+P2)/2)]. When price increases from $5 to $6, the quantity demanded decreases from 50 to 30 which gives us (30-50)/[(50+30)/2]=-0.4 for the numerator and (6-5)/[(5+6)/2]=0.18 for the denominator, giving us an elasticity of 0.4/0.18≈0.41.

Table 5-5 -Refer to Table 5-5. as Price Rises from $5 to from $5