Question

b) In each calculate the price elasticity of demand
i) The price of a product falls from $8to $6 causing demand to extends from 1250 to 12500
ii) Demand contracts from 500 to 400 when price rises from$40 to$42.
iii) Demand extends from 2000 to 2800 when price falls from $20 to$18

Answer 1

Answer:

Method for Elasticity, and is represented in the following equations:

%

c

h

a

n

g

e

i

n

q

u

a

n

t

i

t

y

Q

2

−

Q

1

(

Q

2

+

Q

1

)

/

2

×

100

%

c

h

a

n

g

e

i

n

p

r

i

c

e

P

2

−

P

1

(

P

2

+

P

1

)

/

2

×

100

The advantage of the is Midpoint Method is that one obtains the same elasticity between two price points whether there is a price increase or decrease. This is because the formula uses the same base for both cases.