The figure above shows the supply curve for roses.
-Suppose an increase in supply lowers the price from $10 to $8 and increases the quantity demanded from 100 units to 130 units.Using the midpoint method,the elasticity of demand equals
A) 1.17.
B) 0.85.
C) 0.26.
D) 1.56.
E) None of the above answers is correct.

Question

The figure above shows the supply curve for roses.
-Suppose an increase in supply lowers the price from $10 to $8 and increases the quantity demanded from 100 units to 130 units.Using the midpoint method,the elasticity of demand equals
A) 1.17. 
B) 0.85. 
C) 0.26. 
D) 1.56. 
E) None of the above answers is correct.

Quizplus · Accepted Answer

The midpoint method formula for elasticity of demand is [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Plugging in the values: [(130 - 100) / (130 + 100) / 2] / [(8 - 10) / (8 + 10) / 2] = 30/115 / -2/9 = 1.17.

The Figure Above Shows the Supply Curve for Roses