Question

Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between $10 and $8, by the midpoint method, is approximately

1.17

Answer 1

Given data :

Quantity demanded = 100

Price = $10

Price falls to = $8, increase in demand = 130

It is given that the price elasticity of demand by the mid-point method is 1.17 approx.

EP using the mid point method

`$=$ Change in Quantity divided by Change in Price $* \mathrm{P}_(0)+\mathrm{P}_(1)$ divided by $\mathrm{Q}_(0)+\mathrm{Q}_(1)$`

`=130-100 / 8-10 * 18 / 230`

`=30 /-2 * 18 / 230`

= - 1.17

The sign only indicates that EP is always negative.