Question

5. As the price of laptops increases from RM2,000 to RM3,500 per unit, the quantity

demanded for laptops decreases from 200 units to 150 units.
© Using the midpoint approach, compute and interpret the coefficient of the price
elasticity of demand for laptops; (6 marks)
​

Answer 1

-0.523 and inelastic

Step-by-step explanation:

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

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

where,

Change in quantity demanded is

= Q2 - Q1

= 150 units - 200 units

= -50 units

And, average of quantity demanded would be

= (150 units + 200 units ) ÷ 2

= 175 units

Change in price would be

= P2 - P1

= 3,500 - 2,000

= 1,500

And, average of price would be

= (3,500 + 2,000) ÷ 2

= 2750

So, after solving this, the price is -0.523

Since the price elasticity of demand is less than 1 so it would be inelastic