Answer:
0.6
Explanation:
Initial Units sold, Q1 = 40 pairs
Initial Price, P1 = $40
Final price, P2 = $20
Final units sold = 60 pairs
Now,
Using the midpoint formula,
the absolute value of the price elasticity of demand
price elasticity of demand = [tex]\frac{\frac{Change in quantity sold}{\frac{Total quantity sold}{2}}}{\frac{Change in price}{\frac{Total price}{2}}}[/tex]
or
price elasticity of demand = [tex]\frac{\frac{Q2-Q1}{\frac{Q1+Q2}{2}}}{\frac{P1-P2}{\frac{P2+P1}{2}}}[/tex]
or
price elasticity of demand = [tex]\frac{\frac{60-40}{\frac{40+60}{2}}}{\frac{40-20}{\frac{40+20}{2}}}[/tex]
or
price elasticity of demand = [tex]\frac{\frac{20}{50}}{\frac{20}{30}}[/tex]
price elasticity of demand = 0.6
