Question

Suppose when the price of a cookie is $2.50, the quantity demanded is 50, and when the price is $1, the quantity demanded is 200. Using the midpoint method, the price elasticity of demand is:

Answer 1

The price elasticity of demand is -1.40

Step-by-step explanation:

E = [Q2-Q1/(Q2+Q1/2)]/[P2-P1/(P2+P1/2)]

= [200-50/(200+50/2)] / [1-2.5/(1+2.5/2)]

= [150/125]/[1.5/1.75]

= 1.2/0.8571

= -1.4 0

the price elasticity of demand is -1.40