Question

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by:
a. 30%.
b. 40%.
c. 60%.
d. 74%.

Answer 1

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by (c) 60%.

Explanation:

The Price elasticity of demand (PED or Ed) is defined as a measure  used in economics to show the relation or elasticity  of the quantity demanded of a good or service to increase in its price when only  the price changes.

The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price.

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by (c) 60%.