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Gennadij [26K]
2 years ago
7

Use the midpoint method to calculate the price elasticity of demand for potato chips that increased in price from $2.00 to $3.00

. The quantity demanded decreased from 100 bags a week to 50 bags a week at the local grocery store. Round to one decimal place
Social Studies
1 answer:
fiasKO [112]2 years ago
5 0

Answer:

e_p ≅ -1.7.

Explanation:

Let's calculate the change in quantity:

\frac{Q_2 - Q_1}{\frac{Q_2+Q_1}{2} } = \frac{50-100}{\frac{50+100}{2} } = (approx.) -0.67.

Let's now calculate the change in price:

\frac{P_2 - QP_1}{\frac{P_2+P_1}{2} } = \frac{3.00-2.00}{\frac{3.00+2.00}{2} } = 0.40.

Finally, let's calculate the price elasticity of demand:

e_p = \frac{-0.67}{0.40} = (approx) -1.7.

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