Final answer:
The midpoint method for elasticity involves calculating the average percentage change in quantity and price to find the price elasticity of demand. Without exact quantity changes, we cannot calculate a specific elasticity when the price of gosum berries rises from $70 to $80. However, elasticities above 1 suggest price decrease advice, below 1 suggest increase, and at 1 suggest maintaining price.
Step-by-step explanation:
The student asked how to calculate the price elasticity of demand using the midpoint method when the price of a barrel of gosum berries rises from $70 to $80. It's important to note that key details to complete the calculation, such as the corresponding change in quantity demanded, are missing. However, we can still discuss the elasticity conceptually.
Midpoint Method for Elasticity calculates the average percentage change in both quantity demanded and price. The formula is:
Price Elasticity of Demand (PED) = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
The percentage changes are calculated using the average of the initial and final quantities and prices, respectively. If an elasticity value is computed and it is greater than 1, demand is considered elastic, and consumers are responsive to price changes. If the value is less than 1, demand is inelastic, and consumers are less responsive to price changes. At an elasticity of exactly 1, demand is unit-elastic.
Without specific quantity data, we cannot calculate the exact elasticity. However, if we were given that the elasticity is 1.4, we would advise to lower the price to increase total revenue, as a greater percentage increase in quantity sold would offset the percentage decrease in price. If it were 0.6, we would advise to raise the price since the loss in quantity sold would be less than the gain from the higher price, thereby increasing total revenue.