Question

The data below represent a demand schedule. Product Price Quantity Demanded

$30 10
25 20
20 30
15 40
10 50
Using the midpoint approach, determine the price elasticity of demand between each of the following prices:
Instructions: Round your answers to two decimal places. Enter your answers as a positive value (absolute value). a. Between P1 = $30 and P2 = $25, Ed= b. Between P1 = $25 and P2 = $20, Ed=
c. Between P1 = $20 and P2 = $15, Ed= d. Between P1 = $15 and P2 = $10, Ed= |

Answer 1

Price elasticity of demand between the given price intervals is calculated using the midpoint method, resulting in elasticities of 0.67 (between $30 and $25), 0.80 (between $25 and $20), 1.14 (between $20 and $15), and 1.43 (between $15 and $10), respectively.

Step-by-step explanation:

The midpoint approach is used to calculate the price elasticity of demand, which measures how much the quantity demanded of a product responds to a change in price. To calculate the elasticity using the midpoint approach, you use the following formula:

Price Elasticity of Demand (Ed) = (Q2 - Q1) / [(Q2 + Q1) / 2] / (P2 - P1) / [(P2 + P1) / 2]

Here, Q1 and Q2 are the initial and final quantities demanded, and P1 and P2 are the initial and final prices.

We'll calculate the elasticity for each given price range:

1. Between P1 = $30 and P2 = $25
   Ed = ((20 - 10) / (20 + 10) / 2) / ((25 - 30) / (25 + 30) / 2)
   Ed = 0.67
2. Between P1 = $25 and P2 = $20
   Ed = ((30 - 20) / (30 + 20) / 2) / ((20 - 25) / (20 + 25) / 2)
   Ed = 0.80
3. Between P1 = $20 and P2 = $15
   Ed = ((40 - 30) / (40 + 30) / 2) / ((15 - 20) / (15 + 20) / 2)
   Ed = 1.14
4. Between P1 = $15 and P2 = $10
   Ed = ((50 - 40) / (50 + 40) / 2) / ((10 - 15) / (10 + 15) / 2)
   Ed = 1.43

Therefore, the price elasticities of demand for each price interval given are 0.67, 0.80, 1.14, and 1.43, respectively. These values indicate that the demand becomes more elastic as the price decreases from $30 to $10.