Question

Use the midpoint formula to answer this question. Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand is _____.

Answer 1

Answer:

1.4

Explanation:

The computation of the price elasticity of demand using mid point formula is presented below:

= (change in quantity demanded ÷ average of quantity demanded) ÷ (percentage change in price ÷ average of quantity demanded)  

where,  

Change in quantity demanded would be

= Q2 - Q1

= 118 - 110

= 8

And, average of quantity demanded would be

= (118 + 110) ÷ 2

= 114

Change in price would be

= P2 - P1

= $2.00- $1.90

= $0.10

And, average of price would be

= ($2.00 + $1.90) ÷ 2

= 1.95

So, after solving this, the price is 1.4