Question

Consider the following combinations of price and quantity demanded for an unnamed good. These questions ask you to perform several percentage change an elasticity calculations. When calculating percentage change, some questions ask you to use the traditional formula and some ask you to use the midpoint formula. For clarity, these two formulas are given below. The values you calculate should be between -100 and 100 (not -1 to 1). Please include the sign (if negative) in all of your responses. Round answers to one decimal place for percent changes and two decimal places for elasticities.

Traditional formula for percentage change in X:  X 2 − X 1 X 1 × 100

Midpoint formula for percentage change in X:   X 2 − X 1 X ¯ × 100 , w h e r e X ¯ = X 1 + X 2 2

Price	Quantity Demanded
100	350
150	250

Q 1.1: Suppose the price of a winter jacket increases from 100 to 150. What is the percentage change in the price using the traditional formula? (2 points)

Q 1.2: Suppose the price of a winter jacket decreases from 150 to 100. What is the percentage change in the price using the traditional formula? (2 points)

Q 1.3: What is the percentage change in price from 100 to 150 calculated using the midpoint formula?

Q 1.4: What is the percentage change in price from 150 to 100 calculated using the midpoint formula?

Q 1.5: What is the price elasticity of demand as price moves from 100 to 150 using the midpoint formula?

Q 1.6: What is the price elasticity of demand as price moves from 150 to 100 using the midpoint formula?

Q 1.7: Is demand for this good elastic, inelastic, or unit elastic between these two prices?

Answer 1