Question

Move point A to the correct position on the demand curve when price is $40. Next move point B to the correct position on the demand curve when price is $10. Now, consider a movement along this demand curve from A to B.Use the midpoint formula to calculate the percentage change in quantity demanded between A and B. (Include a negative sign if the answer is negative; round to the nearest integer.)Next, use the midpoint formula to calculate the percent change in price between A and B. (Include a negative sign if the answer is negative; round to the nearest integer.)What is the price elasticity of demand between these two points? (Include a negative sign if the answer is negative; round to two decimals.)

Answer 1

Answera and Explanation:

% change in quantity demanded = (600 - 300)/[(600 + 300)/2]

                                                      = 67%

Therefore, The % change in quantity demanded is 67%.

% change in price = (10 - 40)/[(40 + 10)/2]

                              =   -120%

Therefore, The % change in price is -120%

price elasticity of demand

= % change in quantity demanded/% change in price

= 67/-120

= -0.558

Therefore, The price elasticity of demand is -0.558.