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24 wrz 2020 · Lumen Learning – Calculating Price Elasticity using the Midpoint Formula – Part of a larger course on microeconomics, this page details how to use the midpoint formula. Includes formulas and sample questions.
Make a demand curve and Try some sample calculations for yourself. You will see, For example, that a change of 1 is a bigger percentage when the price is 10 than it is when the price is 100.
The price elasticity of demand is the ratio of these two percentages: \epsilon_ {Q,P} = \frac {\color {#d62728}\%\Delta Q} {\color {#2ca02c}\%\Delta P}=\frac {\color {#d62728}-40\%} {\color {#2ca02c}+25\%} = -1.60 ϵQ,P = %ΔP %ΔQ = +25%−40% = −1.60. Since |\epsilon| > 1 ∣ϵ∣ > 1, we say that demand is elastic in this region.
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If a pack of cigarettes currently costs $6 and the government aims to decrease smoking by 20 percent, by how much should it increase the price? Learn Elasticity and the Midpoint Method with free step-by-step video explanations and practice problems by experienced tutors.
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