Question

- The following data below represent the demand schedule for good X.

Price ($) |
Quantity Demanded |

22 |
32 |

18 |
48 |

14 |
64 |

10 |
80 |

8 |
96 |

Use the midpoint formula to determine the price elasticity of demand at the following price points:

$22 and $18

Answer #1

Ans. Using the midpoint method

Price Quantity demanded

$22 32

$18 48

% change in price = change in price /average price x 100

% change in price = $18 - $22/( $22+$18)/2 x 100

= - 20 %

And

% change in quantity demanded = change in quantity/average quantity x 100

= 48 - 32/(32+48)/2 x 100

= 40%

Then

The price elasticity of demand = % change in quantity demanded/% change in price

= 40%/ (- 20%)

= - 2

Hence, the price elasticity of demand is 2.

Note:

A negative sign denoted the negative relationship between price and quantity demanded.

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Quantity demanded
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48
55
€ 12
40
50
€ 14
32
45
€ 16
24
40
€ 18
16
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Quantity of Pizzas Demanded
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8
40
50
10
32
45
12
24
30
14
16
20
16
8
12
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Price
Quantity Demanded when income =$10,000
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$5
50
60
$7
40
55
$9
30
50
$11
20
45
$13
10
40
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