Table 5-1

-Refer to Table 5-1.As price rises from $10 to $15,the price elasticity of demand using the midpoint method is approximately
A) 0.40.
B) 0.56.
C) 1.80.
D) 2.50.

Question

Table 5-1
 
-Refer to Table 5-1.As price rises from $10 to $15,the price elasticity of demand using the midpoint method is approximately
A) 0.40. 
B) 0.56. 
C) 1.80. 
D) 2.50.

Quizplus · Accepted Answer

The midpoint formula for price elasticity of demand is [(Q2-Q1)/((Q2+Q1)/2)]/[(P2-P1)/((P2+P1)/2)]. Using the values from the table, when price increases from $10 to $15, the quantity demanded decreases from 90 to 70. Plugging these values into the midpoint formula, we get [(70-90)/((70+90)/2)]/[(15-10)/((15+10)/2)] which simplifies to -0.5/0.375 or approximately -1.33. Taking the absolute value, we get a price elasticity of demand of approximately 1.33. Therefore, the answer is B, 0.56 (the reciprocal of 1.33).

Table 5-1 -Refer to Table 5-1.As Price Rises from $10 to $15,the