When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. using the midpoint method, the price elasticity of demand is about
a. 1.83.
b. 2.
c. 10.
d. 0.55?
price elasticity can be calculated using the attached formula where: the first term represents the % change in quantity and the second term represents the % change in price
% change in quantity = (100-120) / (220/2) = -2/11 x 100 = -18.1818% % change in price = (7-5) / (12/2) = 33.3333%
price elasticity = 18.1818/33.3333 = 0.55
Note that the price elasticity is usually taken as an absolute value.
