Question

The demand for pianos increases from 400 to 500 when the price decreases from $12000 to $10000. What is the price elasticity of demand using the midpoint formula? Select one: O a.0.8 O b.0.5 С. 122 O d. 1.35

Answer 1

Option (c).

Elasticity = (Change in quantity demanded / Average quantity demanded) / (Change in price / Average price)

= [(500 - 400) / (500 + 400)] / [$(10,000 - 12,000) / $(10,000 + 12,000)]

= (100 / 900) / (-2,000 / 22,000)

= -1.22

Absolute value = 1.22