Final answer:
To calculate the price elasticity of demand using the midpoint method, one uses a specific formula that compares the average percent change in quantity demanded to the average percent change in price, allowing for a consistent elasticity measure regardless of price direction changes. Exact values cannot be determined without specific quantities.
Step-by-step explanation:
To calculate the price elasticity of demand using the midpoint method, we need to use the formula that measures the percent change in quantity demanded relative to the percent change in price. The formula is:
Price Elasticity of Demand (PED) = (Q2 - Q1) / ((Q2 + Q1)/2) / (P2 - P1) / ((P2 + P1)/2)
Where:
- Q1 and Q2 are the initial and final quantities demanded,
- P1 and P2 are the initial and final prices.
The advantage of the midpoint method is that it provides a consistent measure of elasticity regardless of whether there is a price increase or decrease.
Since the question does not provide specific quantities demanded at the prices of $2 and $2.50, we can't calculate an exact value for the elasticity. However, by applying the formula above with the proper quantities filled in, the student would be able to find the elasticity between those two price points.