Graph 5-2
-In Graph 5-2, the elasticity of demand from point B to point C, using the midpoint method, would be:
A)0.5
B)0.75
C)1.0
D)1.3

Question

Graph 5-2  
-In Graph 5-2, the elasticity of demand from point B to point C, using the midpoint method, would be:
A)0.5 
B)0.75 
C)1.0 
D)1.3

Quizplus · Accepted Answer

Using the midpoint method, the formula for calculating elasticity is:

Elasticity = (ΔQ/((Q1+Q2)/2)) / (ΔP/((P1+P2)/2))

From point B to point C, there is a decrease in quantity demanded from 10 units to 5 units (ΔQ = -5) and an increase in price from $5 to $10 (ΔP = $5).

Using the values at point B and C:

(Q1+Q2)/2 = (10+5)/2 = 7.5
(P1+P2)/2 = (5+10)/2 = 7.5

Plugging these values into the formula:

Elasticity = (-5/(7.5)) / (5/(7.5)) = -0.6667

However, we need to take the absolute value since elasticity is always positive:

Elasticity = |-0.6667| = 0.6667

Therefore, the correct answer is B) 0.75, which is the closest choice to 0.6667.