Question

Table 5-6 Total rice evenue $10 $15 $20 25 $30 $5,000 $6,000 $6,000 $5,000 $3,000 Refer to Table 5-6. As price rises from S10 to S15, the price elasticity of demand using the midpoint method is approximately Oa. 0.40 b. 0.56 O c. 1.80 d. 2.50

As price rises from $10 to $15, the price elasticity of demand using the midpoint method is approximately

(Answer should be 0.56)

Answer 1

	P	Q=TR/P	TR	Change in P	Change in Q	Average P	Average Q	Ed mid pt.
	10	500	5000
	15	400	6000	5	-100	12.5	450	-0.56
	20	300	6000	5	-100	17.5	350	-1.00
	25	200	5000	5	-100	22.5	250	-1.80
	30	100	3000	5	-100	27.5	150	-3.67
	The formula for mid point elasticity
	Ed = (Change in quantity/change in price)*(average price/average quantity)
	The elasticity is 0.56