Respuesta :
Answer:
-1.4
Explanation:
The computation of the price elasticity of demand using mid point formula is presented below:
= (change in quantity demanded ÷ average of quantity demanded) ÷ (percentage change in price ÷ average of quantity demanded)
where,
Change in quantity demanded would be
= Q2 - Q1
= 20,000 - 30,000
= -10,000
And, the average of quantity demanded would be
= (20,000 + 30,000) ÷ 2
= 25,000
Change in price would be
= P2 - P1
= $40 - $30
= $10
And, the average of price would be
= ($40 + $30) ÷ 2
= 35
So, after solving this, the price elasticity of demand is -1.4
The price elasticity of demand for cable television in Small Town is 1.4.
The price elasticity of demand is the ratio of the percentage change in the quantity demanded to the percentage change in the price of a good. It measures the sensitivity of quantity demanded to changes in the price of the good.
Price elasticity of demand = midpoint change in quantity demanded / midpoint change in price
Midpoint change in quantity demanded = change in quantity demanded / average of both demands
change in quantity demanded = 20,000 - 30,000 = -10,000
average of both demands = (20,000 + 30,000) / 2 = 25,000
Midpoint change in quantity demanded= -10,000 / 25,000 = -0.40
Midpoint change in price = change in price / average of both price
change in price = $40 - $30 = $10
average of both price = ($40 + $30) / 2 = $35
Midpoint change in price = $10 / $35 = 0.29
Price elasticity of demand = -0.40 / 0.29 = -1.4 = 1.4
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