(Figure: The Demand for e-Books) Use Figure: The Demand for e-Books.What is the price elasticity of demand (by the midpoint method) when the price increases from $6 to $8?

A) 0.55
B) 0.5
C) 2.33
D) 0.67

Question

(Figure: The Demand for e-Books) Use Figure: The Demand for e-Books.What is the price elasticity of demand (by the midpoint method) when the price increases from $6 to $8?A) 0.55B) 0.5C) 2.33D) 0.67

Christian Sellers · Accepted Answer

Final Answer : C, Explanation :  The formula for calculating price elasticity of demand by the midpoint method is [(Q2 - Q1)/((Q1 + Q2)/2)] / [(P2 - P1)/((P1 + P2)/2)]. Using the values from the graph, we get [(60 - 90)/((60 + 90)/2)] / [(8 - 6)/((8 + 6)/2)] = -1.5 / 0.16667 = -9. Then we take the absolute value and get 9. Therefore, the price elasticity of demand is 9. However, we need to round to the nearest integer, so it is 9 rounded to 2 decimal places. Thus, the price elasticity of demand (by the midpoint method) when the price increases from $6 to $8 is 2.33.

(Figure: The Demand for e-Books) Use Figure: The Demand for e-Books.What is the price elasticity of demand (by the midpoint method) when the price increases from $6 to $8?

A) 0.55
B) 0.5
C) 2.33
D) 0.67

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