Question

When price is $5 per unit, quantity demanded is 12 units. When price is $8 per unit, quantity demanded is 6 units. The value of the price elasticity of demand is approximately (before taking absolute value by employing midpoint method) Group of answer choices

Answer 1

-13 ÷ 9

Step-by-step explanation:

The computation of the price elasticity of demand is given below:

As we know that

Price elasticity of demand = % change in quantity demanded ÷ % change in price

So,

% change in quantity demanded is

= (6 units - 12 units) ÷ (6 units + 12 units) ÷ 2

= -6 units ÷ 9 units

= -2 ÷ 3

And,

% change in the price is

= ($8 - $5) ÷ ($8 + $5) ÷ 2

= $3 ÷ $6.5

Now the price elasticity of demand is

= ( -2 ÷ 3 ) ÷ (3 ÷ 6.5)

= -13 ÷ 9