Question

The data in that table shows the price and quantity demanded for running shoes. Using the Midpoint Method, what is price elasticity of demand from point B to point D? Note: Remember to take the absolute value of the result and round to the nearest hundredth. Rounding should be done at the end of your calculation. Point Price Quantity A $120 15,000 B $125 14,600 C $130 14,200 D $135 13,800 E $140 13,400

Answer 1

Given -

Q1 = 14600 ; P1 = $125

Q2 = 13800 ; P2 = $135

The formula for calculating the price elasticity of demand using the Midpoint Method is -

Price elasticity of demand = ( Q2 – Q1 ) / [ ( Q2 + Q1 ) / 2] / ( P2 – P1 ) / [ ( P2 + P1 ) / 2 ]

Price elasticity of demand = ( 13800 – 14600 ) / [ ( 13800 + 14600 ) / 2 ] / ( 135 – 125 ) / [ ( 135 + 125 ) / 2 ]

Price elasticity of demand = [ -800 / 14200 ] / [ 10 / 130 ]

Price elasticity of demand = -0.0563 / 0.0769

Price elasticity of demand = 0.73

Since price elasticity of demand is less than 1, demand in inelastic between these two points.