Question

A shoe store for men sells an average of 40 pairs of shoes per day when the price is $50 per pair. When 60 pairs of shoes are sold per day, the average price per pair is $40. By using the midpoint method, what is the absolute value of the price elasticity of demand?

Answer 1

The absolute value of the price elasticity of demand calculated using the midpoint method for a shoe store for men is 1.8.

Step-by-step explanation:

The absolute value of the price elasticity of demand for a shoe store for men can be calculated using the midpoint method. First, we calculate the percentage change in quantity and the percentage change in price.

The average of the two quantities is (40 + 60)/2 = 50 pairs, and the average of the two prices is ($50 + $40)/2 = $45. The change in quantity is 60 - 40 = 20 pairs, and the change in price is $40 - $50 = -$10. The percentage change in quantity is then (20/50) * 100 = 40%, and the percentage change in price is (-$10/$45) * 100 = -22.22%.

Now, we divide the percentage change in quantity by the percentage change in price to get the elasticity. Therefore, the absolute value of the elasticity is |(40%)/(-22.22%)| = |1.8| = 1.8.