Question

When the price of a burrito increases from​ $2 to​ $4, the quantity demanded decreases from 50 to 40. At the midpoint between these two​ prices, the price elasticity of demand equals __________.

Answer 1

0.33

Step-by-step explanation:

The computation of the price elasticity of demand using mid point formula is presented below:

= (change in quantity demanded ÷ average of quantity demanded) ÷ (percentage change in price ÷ average of quantity demanded)

where,

Change in quantity demanded would be

= Q2 - Q1

= 50 - 40

= 10

And, average of quantity demanded would be

= (40 + 50) ÷ 2

= 45

Change in price would be

= P2 - P1

= $4 - $2

= 2

And, average of price would be

= ($2 + $4) ÷ 2

= 3

Therefore, after solving this, the price is 0.33