The price elasticity of demand using the midpoint formula is -0.67.
The mid-point formula for calculating percentage changes is given by:
Percentage change in quantity = { ( Q₂ - Q₁) / [ (Q₁ + Q₂)/2 ] } × 100
Percentage change in quantity = {( 70000-50000) / [(50000 + 70000)/2 ]}×100
Percentage change in quantity = (20000/ 60000) × 100
Percentage change in quantity = 33.33%
Percentage change in price ={ ( P₂ - P₁) / [ (P₁ + P₂)/2 ] } × 100
Percentage change in price = {( 15-25) / [(25 + 15)/2 ]}×100
Percentage change in price = (-10/ 20) × 100
Percentage change in price = -50.00%
Price Elasticity of Demand = (% change in quantity) ÷ (% change in price)
Price Elasticity of Demand = 33.33/-50 = -0.67
Elasticity measures the responsiveness of quantity demanded to a change in the price of a good. The mid-point method of elasticity uses average percent change in both quantity and price ,
[tex] e=\frac{Q2-Q1}{(Q2+Q1)/2} * \frac{(P2+P1)/2}{P2-P1} [/tex]
[tex] e= \frac{70000 - 50000}{70000+50000/2} * \frac{25+15/2}{25 - 15} [/tex]
[tex] e=\frac{20000}{60000} * \frac{20}{10}
e= 0.6667 [/tex]
So, the correct option is 0.67
