Question

An economist observes two different prices and two different quantities demanded: p1=2. D(p 1)=4, and p2=3,D(p2)=1. Using the midpoint method, what is the price elasticity of demand between these two points?

Answer 1

The price elasticity of demand between the two points is -0.4. The answers for the two different sets of prices would not be expected to be the same.

Step-by-step explanation:

To calculate the price elasticity of demand using the midpoint method, we need to use the following formula:

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

Let's calculate the price elasticity of demand between the points p1=2, D(p1)=4 and p2=3, D(p2)=1:

(1 - 4) / ((4 + 1) / 2) / (3 - 2) / ((2 + 3) / 2) = -3 / 2 / 1 / 2.5 = -0.4

So, the price elasticity of demand between these two points is -0.4.

Regarding the question about whether we would expect the answers to be the same for the two sets of prices provided, the answer is no. The price elasticity of demand depends on the specific prices and quantities demanded at each point, so it can vary between different sets of prices.