CIMA BA1 · Chapter 6 · Question 4 of 10
Price rises from $8 to $10 and quantity demanded falls from 1,200 to 1,000 units. Using the midpoint (arc) method, what is the price elasticity of demand (ignoring the sign, to two decimal places)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 0.82
Explanation
Midpoint method: % change in quantity = -200 / average quantity 1,100 = -18.18%. % change in price = 2 / average price 9 = 22.22%. PED = 18.18 / 22.22 = 0.82 (rounded to two decimal places). Using the original values instead gives 0.67.
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