Suppose the price of a bag of frozen chicken nuggets decreases from $6.10 to $5.90 and, as a result, the quantity of bags demanded increases from 560 to 620. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is
A)0.33.
B)0.10.
C)3.05.
D)0.03.

Question

Quizplus · Accepted Answer

The midpoint method for calculating elasticity is given by the formula: Elasticity = [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)], where Q1 and Q2 are the initial and final quantities, and P1 and P2 are the initial and final prices. Plugging in the given values: [(620 - 560) / ((620 + 560)/2)] / [($5.90 - $6.10) / (($5.90 + $6.10)/2)] = (60 / 590) / (-0.20 / 6) = 0.1017 / -0.0333 ≈ -3.05. The negative sign indicates the direction of the change, but elasticity is often reported in absolute value, making the answer 3.05.

Suppose the Price of a Bag of Frozen Chicken Nuggets