Use the following to answer question:
-(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $1.25 and $1.00?
A)0.60
B)0.82
C)1.00
D)1.60

Question

Use the following to answer question: 
-(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $1.25 and $1.00?
A)0.60 
B)0.82 
C)1.00 
D)1.60

Quizplus · Accepted Answer

Using the midpoint formula: 
Ep = ((Q2-Q1)/((Q2+Q1)/2))/((P2-P1)/((P2+P1)/2))
Ep = ((400-500)/((400+500)/2))/((1.25-1.00)/((1.25+1.00)/2)) = -0.82/0.25 = -3.28
Absolute value of price elasticity of demand is 3.28. Since it is greater than 1, demand is elastic. Therefore, the price elasticity of demand between $1.25 and $1.00 is 0.82.

Use the Following to Answer Question