Question

At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 9 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals using the midpoint formula.

A. 0.75B. 0.9C. 2D. 1.25

Answer 1

The correct answer is option is B.

Step-by-step explanation:

The price elasticity of demand shows the change in quantity demanded due to change in price level.

The initial price is $100.

The quantity demanded initially is 11.

The price is increased to $125.

The quantity demanded falls to 9.

The price elasticity through midpoint method will be 0.90., as shown in the attached figure.