question archive How can we use the Midpoint Formula for Ed to determine the price elasticity of demand for each of the four possible 1 euro price changes (that is, from 5 euro to 4euro, from 4 euro to 3 euro, from 3 euro to 2 euro and from 2 euro to 1 euro) in the table below? Show all calculations
How can we use the Midpoint Formula for Ed to determine the price elasticity of demand for each of the four possible 1 euro price changes (that is, from 5 euro to 4euro, from 4 euro to 3 euro, from 3 euro to 2 euro and from 2 euro to 1 euro) in the table below? Show all calculations
Subject:EconomicsPrice:2.88 Bought3
How can we use the Midpoint Formula for Ed to determine the price elasticity of demand for each of the four possible 1 euro price changes (that is, from 5 euro to 4euro, from 4 euro to 3 euro, from 3 euro to 2 euro and from 2 euro to 1 euro) in the table below? Show all calculations.
| Price (euros) | 5 | 4 | 3 | 2 | 1 |
| Quantity demanded | 1 | 2 | 3 | 4 | 5 |
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Formula for calculating elasticity, using mid point method, is as follows:
Ed = (Q2-Q1)/((Q2+Q1)/2) / (P2-P1)/((P2+P1)/2)
Where Q2 and P2 represents new quantity demanded and new price, respectively. Similarly, Q1 and P1 are original demand and price.
1) Elasticity when price changes from 5 euro to 4 euro:
Ed = (2-1)/((2+1)/2) / (4-5)/((4+5)/2)
Ed = -3
2) Elasticity when price changes from 4 euro to 3 euro:
Ed = (3-2)/((3+2)/2) / (3-4)/((3+4)/2)
Ed = -1.4
3) Elasticity when price changes from 3 euro to 2 euro:
Ed = (4-3)/((4+3)/2) / (2-3)/((2+3)/2)
Ed = -0.71
4) Elasticity when price changes from 2 euro to 1 euro:
Ed = (5-4)/((5+4)/2) / (2-1)/((2+1)/2)
Ed = -0.33
