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The price elasticity of demand is 0.77

What is price elasticity of demand?

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = midpoint change in quantity demanded / midpoint change in price  

What is the price elasticity of demand?

Midpoint change in quantity demanded = change in quantity demanded / average of both demands

  • change in quantity demanded = 15 million - 12 million = 3 million
  • average of both demands = (15 +12 ) / 2 = 13.5 million
  • Midpoint change in quantity demanded = 3 / 13.5 = 0.22

midpoint change in price = change in price / average of both price

  • change in price = $1.5 - $2 = $-0.50
  • Average of both prices = (1.5 + 2) / 2 = $1.75
  • midpoint change in price = $0.5 / 1.75 = 0.29

Mid-point price elasticity of demand = 0.22 / 0.29 = 0.77

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