Answer :
The absolute value of the price elasticity of demand is 0.46.
What is price elasticity of demand?
The price elasticity of demand is used to determine the quantity sought after for a good. When prices rise, demand declines for almost all products, but some products are more negatively impacted than others. When a price increases by 1% while all other factors remain constant, the price elasticity provides the percentage change in quantity required. A 1% increase in price results in a 2% decrease in demand when the elasticity is negative two. The effects of changes in other parameters on the needed quantity are evaluated by other elasticities (e.g. the income elasticity of demand for consumer income changes).
What does the microeconomic midpoint technique entail?
With the midpoint formula, percentage changes are calculated by dividing the change by the average, or halfway point, between the starting and final values. As a result, the outcome is the same regardless of the direction of the change.
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Question:
Price Quantity
250 0
200 30
150 70
100 110
50 150
0 190
Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is
a. 0.31.
b. 0.46.
c. 1.25.
d. 2.17
