To calculate the price elasticity of demand using the midpoint method, we can use the following formula:
Price Elasticity of Demand = (Percentage change in quantity demanded) / (Percentage change in price)
First, let's calculate the percentage change in quantity demanded:
Percentage change in quantity demanded = [(New quantity demanded - Old quantity demanded) / ((New quantity demanded + Old quantity demanded) / 2)] * 100%
In this case:
New quantity demanded = 5 units
Old quantity demanded = 10 units
Percentage change in quantity demanded = [(5 - 10) / ((5 + 10) / 2)] * 100%
= (-5 / 7.5) * 100%
= -66.67%
Next, let's calculate the percentage change in price:
Percentage change in price = [(New price - Old price) / ((New price + Old price) / 2)] * 100%
In this case:
New price = $4
Old price = $2
Percentage change in price = [(4 - 2) / ((4 + 2) / 2)] * 100%
= (2 / 3) * 100%
= 66.67%
Now, let's calculate the price elasticity of demand:
Price Elasticity of Demand = (Percentage change in quantity demanded) / (Percentage change in price)
= (-66.67% / 66.67%)
= -1.0
Therefore, the price elasticity of demand for the product is -1.0.
The correct answer is:
d. -1.0