Question

Applying the midpoint formula, what is the price elasticity of demand if a drop in the price of energy drinks from $2 to $1 per can leads to an increase in the quantity demanded from 100 million to 150 million cans

Answer 1

-0.6

Step-by-step explanation:

Price elasticity of demand = Δ Change in quantity / Δ Change in price

Price elasticity of demand = [150-100/((150+100)/2)] / [1-2/((1+2)/2)]

Price elasticity of demand = [50/125]/ [-1/1.5]

Price elasticity of demand = 0.4/-0.66666

Price elasticity of demand = -0.6