i) P = 40 – 0.5Q ii) Q = -4 + 0.75P iii) 4Q + 4P = 64
a) Calculate price elasticity of demand or supply using the point elasticity formula for the functions (i), (ii), (iii) when P=8 and when P=6.
b)Calculate the price elasticity of demand using the mid-point formula between P=6 and P=8 for (i).
a. (i) When P= 8, Q= 64
When P=6, Q= 68
Point elasticity of demand = = (4/-2) *(8/64)= -1/4 = -0.25
(ii) When P=8, Q= 2
When P=6, Q= 0.5
Point elasticity of supply = = (-1.5/-2) * (8/2) = 3
(iii) When P=8, Q= 8
When P=6, Q= 10
Point elasticity of demand = = (2/-2) * (8/8) = -1
b. (i) Price elasticity of demand using mid point formula
E= = [4/66] /[-2/7] = -0.21
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