When the price of a good is $5,the quantity demanded is 100 units per month;when the price is $7,the quantity demanded is 80 units per month.Using the midpoint method,the price elasticity of demand is about
A)0.22.
B)0.67.
C)1.33.
D)1.50.

Question

Quizplus · Accepted Answer

Price elasticity of demand = (% change in quantity demanded) / (% change in price)

Using the midpoint method:
% change in quantity demanded = (change in quantity demanded / average quantity demanded) x 100%
= [(80-100) / ((80+100)/2)] x 100%
= -20/90 x 100%
= -22.22%

% change in price = (change in price / average price) x 100%
= [(7-5) / ((7+5)/2)] x 100%
= 2/6 x 100%
= 33.33%

Price elasticity of demand = (-22.22% / 33.33%)
= -0.6666
= 0.67 (approx.)

Therefore, the price elasticity of demand is about 0.67. Option B is the correct choice.

When the Price of a Good Is $5,the Quantity Demanded