A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q? , P?
And point Q?, P? is
A)[(P? ? P? )/(P? + P?)]/[(Q? ? Q?)/(Q? + Q?)]
B)[(P? ? P? )/P?]/[(Q? ? Q?)/Q?]
C)[(Q? ? Q? )/(Q? + Q?)]/[(P? ? P?)/(P? + P?)]
D)[(Q? ? Q? )/Q?)]/[(P? ? P?)/P?].

Question

A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q? , P?
And point Q?, P? is
A)[(P? ? P? )/(P? + P?)]/[(Q? ? Q?)/(Q? + Q?)] 
B)[(P? ? P? )/P?]/[(Q? ? Q?)/Q?] 
C)[(Q? ? Q? )/(Q? + Q?)]/[(P? ? P?)/(P? + P?)] 
D)[(Q? ? Q? )/Q?)]/[(P? ? P?)/P?].

Quizplus · Accepted Answer

The correct formula for the calculation of elasticity of demand is [(percentage change in quantity demanded)/(percentage change in price)]. However, since we are given two different points rather than percentages, we can calculate the approximate percentage changes using the midpoint formula: [(change in quantity)/(average quantity)] and [(change in price)/(average price)]. Therefore, the correct formula becomes [(Q₂ - Q₁)/( (Q₂ + Q₁)/2)] / [(P₂ - P₁)/((P₂ + P₁)/2)]. Simplifying this expression gives us choice C.

A Correct Formula (Dropping All Minus Signs) for the Calculation