Question

Ch. 4, E 52% 01/21/19 ws the demand schedule for a pint of S One of the problems with the basic elasticity formula is that you get different elasticity values depending on whether you assume the price fals from $8 to $6, or whether you assume the pricerises from $6 to $8. The question below iltustrates how the midpoint formula corrects for this problem. 10th attempt See H Part 1 (1 point) Feedback

Answer 1

Mid point elasticity formula :

e = [(Q₂ - Q₁)/ {(Q₂ + Q₁)/2}] / [(P₂ - P₁)/ {(P₂ + P₁)/2}]

Q₂ = 5

Q₁ = 3

P₂ = 6

P₁ = 8

e = [( 5-3) /{ (5+3)/2}] / [(6 - 8)/{( 6+8)/2}]

e = [2/ 4] / [ -2/7]

e = -1.75

Price elasticity of demand is -1.75