Question

Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method,

Answer 1

The question is incomplete; Calculate the price elasticity of demand

The answer is -2 showing that the Price Elasticity of Demand for the good in question is highly elastic.

Step-by-step explanation:

Price Elasticity of Demand = percent change in quantity / percent change in price

percent change in quantity = {Q 2 − Q 1 / [( Q 2 + Q 1 ) ÷ 2]} × 100

percent change in price = {P 2 − P1 / [( P 2 + P1 ) ÷ 2]} × 100

percent change in quantity= {25 − 20/ [(25 +20) ÷ 2]} × 100= 22.2%

percent change in price = {8-10 / [( 8+10) ÷ 2]} × 100 = -11.11%

Price Elasticity of Demand = 22.2% / -11.11%= -2