Question

Suppose the price of apples increases from $20 to $27, and in response quantity demanded decreases from 108 to 98. Using the mid-point formula, what is the price elasticity of demand

Answer 1

-0.325

Step-by-step explanation:

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

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

where,

Change in quantity demanded is

= Q2 - Q1

= 98 - 108

= -10

And, average of quantity demanded is

= (98 + 108 ) ÷ 2

= 103

Change in price is

= P2 - P1

= $27 - $20

= $7

And, average of price is

= ($27 + $20) ÷ 2

= 23.5

So, after solving this, the price is -0.325