Question

At a price of $1.50, the quantity demanded is 100,000 units. If the price decreases to $1.00, the new quantity demanded would be 200,000 units. Using the Midpoint Method, compute the price elasticity of demand.

Answer 1

The price elasticity of demand is a measure of how responsive the quantity demanded is to a change in price. It is calculated using a formula that compares the percentage change in quantity demanded to the percentage change in price.

Step-by-step explanation:

The price elasticity of demand is a measure of how responsive the quantity demanded is to a change in price. It is calculated using the formula:

Elasticity = ((Q2 - Q1)/(Q1 + Q2)/2) / ((P2 - P1)/(P1 + P2)/2)

Using the given information, we can calculate the percentage change in quantity demanded and the percentage change in price to find the price elasticity of demand.