Question

# Suppose the price of apples increases from \$20 to \$28, and in response quantity demanded decreases...

Suppose the price of apples increases from \$20 to \$28, and in response quantity demanded decreases from 100 to 84. Using the mid-point formula, what is the price elasticity of demand? (Note: your answer should be correct to two decimal places; and be sure to express your answer as a positive number.)

 Price Quantity Demanded \$20 100 \$28 84

Price elasticity of demand = % change in Quantity Demanded / % change in Price

% change in Quantity Demanded = Q2 - Q1 / (Q1+Q2/2) x 100

% change in Quantity Demanded = 84 - 100 / (100+84/2) x 100

% change in Quantity Demanded = -16/ 92 x 100

% change in Quantity Demanded = -17.39%

% change in Price = P2 - P1 / (P1+P2/2) x 100

% change in Price = 28 - 20 / (20+28/2) x 100

% change in Price = 8 / 24 x 100

% change in Price = 33.33%

Price elasticity of demand = % change in Quantity Demanded / % change in Price

Price elasticity of demand = -17.39 / 33.33

Price elasticity of demand = 0.52

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