Suppose the price of mascara is $12 and the quantity demanded is 450. When the price drops to $8, the quantity demanded increases to 550. Using the mid-point method, what is the price elasticity of demand?
A) −0.5
B) −2.0
C) −55
D) −180

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Using the mid-point method, the percentage change in quantity demanded is (550 - 450) / ((550 + 450) / 2) = 100 / 500 = 0.2. The percentage change in price is (8 - 12) / ((8 + 12) / 2) = -4 / 10 = -0.4. Therefore, the price elasticity of demand is 0.2 / -0.4 = -0.5.

Suppose the Price of Mascara Is $12 and the Quantity