Answer:
Option (c) is correct.
Explanation:
Initial quantity demanded = 800
New quantity demanded = 600
Initial price = $4
New price = $4.50
Using the midpoint formula,
For price:
Average price:
= (Initial price + New price) ÷ 2
= ($4 + $4.50) ÷ 2
= $4.25
Change in price = New price - Initial price
= $4.50 - $4
= $0.50
For Quantity demanded:
Average quantity demanded:
= (Initial Quantity demanded + New Quantity demanded) ÷ 2
= (800 + 600) ÷ 2
= 700
Change in quantity demanded:
= New Quantity demanded + Initial Quantity demanded
= 600 - 800
= -200
Price elasticity of demand:
[tex]=\frac{\frac{Change\ in\ quantity\ demanded}{Average\ quantity\ demanded} }{\frac{Change\ in\ price}{Average\ price}}[/tex]
[tex]=\frac{\frac{(-200)}{700} }{\frac{0.50}{4.25}}[/tex]
= (- 0.29) ÷ 0.12
= -2.43
