Answer to Question #286349 in Microeconomics for rexfer

Question

P($)       Q

70         2800

60         3000

Calculate Price Elasticity of Demand using Mid-Point Method.

Answer 1

To calculate price elasticity using me point method, you are supposed to use the percentage change in both the quantity and price. The formula is as below;

% change in Quantity$=\frac {Q_2- Q_1}{(Q_2+Q_1)\frac{1}{2}} \times 100$

$=\frac {3000- 2800}{(3000+2800)\frac{1}{2}}\times 100$

$=\frac {200}{2900}\times 100=6.9$%

% Change in Price$=\frac {P_2- P_1}{(P_2+P_1)\frac{1}{2}}\times 100$

$=\frac {60- 70}{(60+70)\frac{1}{2}}\times 100$

$=\frac {-10}{65}\times 100=-15.4$%

Price Elasticity $=\frac {6.9}{-15.4}$

= -0.45