Question

The publisher of an economics textbook finds that, when the book's price is lowered from $70 to $60, sales rise from 10,000 to 15,000. By the midpoint method, the price elasticity of demand is:________.a. 500b. 2.6 c. 3.5d. 50

Answer 1

Answer:

b. 2.6

Explanation:

Price elasticity of demand measures how much quantity demanded changes in response to a change in price.  The Midpoint Method uses the average percent change in both quantity and price.

The formula for calculating midpoint elasticity of demand is a below

PED=(Q2−Q1)÷(Q2+Q1)/2

        (P2−P1)÷(P2+P1)/2

Where Q is quantity and P is price

PED=(15000−10000)÷(15000.+10000)/2

        (60−70)÷(60+70)2

PED =5,000÷12,500

          (10)÷65

PED =0.4

        0.154

PED =2.5974

PED   =2.6