Figure 5-13
-Refer to Figure 5-13.Between point A and point B,price elasticity of demand using the midpoint method is equal to
A)0.71.
B)0.85.
C)1.18.
D)1.40.

Question

Figure 5-13 
-Refer to Figure 5-13.Between point A and point B,price elasticity of demand using the midpoint method is equal to
A)0.71. 
B)0.85. 
C)1.18. 
D)1.40.

Quizplus · Accepted Answer

Using the midpoint method, price elasticity of demand is calculated as:

% Change in quantity demanded / % Change in price

% Change in quantity demanded = [(120 - 80) / ((120 + 80)/2)] x 100% = 33.33%
% Change in price = [(2.50 - 3.50) / ((2.50 + 3.50)/2)] x 100% = -28.57% (the negative sign is dropped)

Price elasticity of demand = 33.33% / 28.57% = 1.166 ≈ 1.18

Therefore, the correct choice is B) 0.85.

Figure 5-13 -Refer to Figure 5-13.Between Point a and Point B,price Elasticity