Question

If the price for gasoline changes from $4 to $3 and the quantity of miles driven changes from 400 to 660 units, what would the elasticity of demand be for gasoline using the midpoint formula. Record your answer as a positive number to two places after the decimal.

Answer 1

Formula :

Elasticity of demand(e) using mid point formula is given by :

where Q" = New quantity = 660, P" = New price = 3, Q' = Initial quantity = 400 and P' = initial price = 4

Thus, using above information and formula we get :

=> e = -1.72. Here we have to write elasticity in positive terms.

Thus,  elasticity of demand be for gasoline using the midpoint formula = 1.72