Figure 7-6

-Refer to Figure 7-6.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.
A) 0.32
B) 0.4
C) 2.5
D) 3.125

Question

Figure 7-6
 
-Refer to Figure 7-6.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.
A) 0.32 
B) 0.4 
C) 2.5 
D) 3.125

Quizplus · Accepted Answer

The midpoint formula for price elasticity of demand is:$$Ed = \frac{Q2 - Q1}{(Q2 + Q1)/2} 	imes \frac{P1 + P2}{P2 - P1}$$where:* Q1 is the quantity demanded at the initial price (P1)* Q2 is the quantity demanded at the new price (P2)* P1 is the initial price* P2 is the new priceUsing the midpoint formula, we can calculate the absolute value of the price elasticity of demand between e and f as follows:$$Ed = \frac{10 - 12}{(10 + 12)/2} 	imes \frac{10 + 12}{12 - 10}$$$$Ed = \frac{-2}{11} 	imes \frac{22}{2}$$$$Ed = -2$$The absolute value of -2 is 2, so the correct answer is D) 3.125.

Figure 7-6 -Refer to Figure 7-6.Using the Midpoint Formula,calculate the Absolute Value