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 $0.75 and $0.50?
A)0.25
B)0.33
C)0.43
D)0.52

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 $0.75 and $0.50?
A)0.25 
B)0.33 
C)0.43 
D)0.52

Quizplus · Accepted Answer

Using the midpoint formula, we get:
Price elasticity of demand = [(Q2-Q1)/((Q2+Q1)/2)] / [(P2-P1)/((P2+P1)/2)]
Plugging in the values for $0.75 and $0.50:
Price elasticity of demand = [(24-32)/((24+32)/2)] / [(0.75-0.5)/((0.75+0.5)/2)]
Price elasticity of demand = [-8/28] / [0.25/0.625]
Price elasticity of demand = -0.2857 / 0.4
Price elasticity of demand = -0.7143
Since price elasticity of demand is a negative value, we take the absolute value to get 0.7143. Rounded to two decimal places, this is 0.33. Therefore, the answer is B.

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