Question

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? use the midpoint formula.

Answer 1

Demand elasticity has an absolute value of 1.619. When a price adjustment has no impact on the quantity required, the demand is said to be perfectly inelastic. In other words, regardless of the price level, the quantity demanded does not change.

Midpoint Price = (P1 + P2) / 2 = (10 + 8) / 2 = 9. % change in qty demanded = (60 – 40) / 50 = 0.4. % change in price = (8 – 10) / 9 = -0.22. Arc Ed = 0.4 / -0.22 = 1.82.

Therefore, it can be said that the price elasticity of demand is 0 in absolute terms. Between these two positions, the elasticity of demand is 0.45, which is less than 1. As a result, the demand throughout this time period is inelastic.

Despite the fact that economists frequently overlook the sign, the PED coefficient is typically negative. If the PED coefficient is less than one, then the demand for a good is comparatively inelastic (in absolute value)

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