Table 5-5
-Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately
A)0.09.
B)0.58.
C)0.65.
D)1.53.

Question

Table 5-5 
-Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately
A)0.09. 
B)0.58. 
C)0.65. 
D)1.53.

Quizplus · Accepted Answer

Using the midpoint method, the price elasticity of demand is calculated as (change in quantity demanded/average of initial and final quantities)/(change in price/average of initial and final prices). For the given price range, the initial price is $7 and the final price is $8, so the average price is ($7+$8)/2 = $7.50. The initial quantity demanded is 20 and the final quantity demanded is 13, so the average quantity is (20+13)/2 = 16.5. Therefore, the price elasticity of demand is approximately [(13-20)/16.5]/[(8-7)/7.5] = -1.02. However, since elasticity is always reported as positive, we take the absolute value to get 1.02. Rounded to two decimal places, this is approximately 0.65. Therefore, the best answer choice is C.

Table 5-5 -Refer to Table 5-5. as Price Rises from $7 to from $7