Question

In​ 1916, the ford motor company sold​ 500,000 model t fords at a price of​ $440. henry ford believed that he could increase sales of the model t by​ 1,000 cars for every dollar he cut the price. use this information to calculate the price elasticity of demand loading... for model t fords. use the midpoint formula in your calculation. assuming the price decreases by​ $1 and the quantity increases by 1000​ cars, the price elasticity of demand for model t fords is nothing ​(enter your response rounded to two decimal​ places).

Answer 1

For the answer to the question above,
we must use this formula,
(New - Old)/ (Ave. of New and Old)

In this case,
501k -500k/(500,500(which is the ave. of the two.
Then it would be 1k/500,500

Then the answer would be .0020
Then
-1.439.5/439.5 because this is the average of the two.
so the answer would be .0023

Then finally divide the rate on change of quantity by the rate of change in price which is
0.002/-0.0023

Then the answer would be -.87

So the elasticity on the demand of model T is .87 ( remove the negative because elasticity is always positive.)