Answer:
Midpoint value of price elasticity of demand = -2.07
Explanation:
We know,
Midpoint value of price elasticity = [tex]\frac{(Q_{2} - Q_{1})/[(Q_{2} + Q_{1})/2] }{(P_{2} - P_{1})/[(P_{2} + P_{1})/2] }[/tex]
Given,
Original Price, [tex]P_{1}[/tex] = $15
New Price, [tex]P_{2}[/tex] = $12
Original Quantity demanded, [tex]Q_{1}[/tex] = 1,000 units
New Quantity demanded, [tex]Q_{2}[/tex] = 1,600 units
Putting the value in the above midpoint formula, we can get
Midpoint value of price elasticity = [tex]\frac{(1,600 - 1,000)/[(1,600 + 1,000)/2]}{(12-15)/[(12+15)/2]}[/tex]
Midpoint value of price elasticity = [tex]\frac{600/1,300}{-3/13.5}[/tex]
Midpoint value of price elasticity = [tex]\frac{0.46}{-0.22}[/tex]
Midpoint value of price elasticity of demand = -2.07
