Question

I'm looking to learn how to calculate elasticity. Using the mid point method how do I calculate the elasticity of demand between two points e.g A and B.

Answer 1

• The price elasticity of demand is the change in the quantity demanded due to the changes in price.
• Inorder to calculate price elasticity of demand between any two price points we usually use the mid point method as it is more simpler and the value we obtain remains the same, regardless of the increase or decrease in price.
• The formula for the price elasticity of demand between any points A and B is given as:-
• Let the quantity and price of a point A be Q1 and P1 and quantity and price of a point B be Q2 and P2.
• Then change in quantity =( (Q2 - Q1) /(Q2+Q1) ÷2 ) * 100
• Change in price =( (P2 - P1) / ( P2+P1) ÷ 2 ) * 100.
• Then PED = ( change in quantity ÷ change in price ) * 100.