The publisher of an economics textbook finds that when the book's price is lowered from $70 to $60, sales rise from 10,000 to 15,000.Using the midpoint method, the price elasticity of demand is:
A)500.
B)50.
C)3.5.
D)2.6.

Question

Quizplus · Accepted Answer

Using the midpoint method formula, we have:
Price elasticity of demand = [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]

Where:
Q1 = 10,000 (original quantity demanded)
Q2 = 15,000 (new quantity demanded)
P1 = $70 (original price)
P2 = $60 (new price)

Plugging in the values, we get:
Price elasticity of demand = [(15,000 - 10,000) / ((15,000 + 10,000) / 2)] / [($60 - $70) / (($60 + $70) / 2)]
= [5,000 / 12,500] / [-$10 / $65]
= 2.6

Therefore, the price elasticity of demand is 2.6. The answer is (D).

The Publisher of an Economics Textbook Finds That When the Book's