As the price of gummy bears rises from $2.65 to $3.05, what is the price elasticity of demand of (i) sugar-free gummy bears and of (ii) ordinary gummy bears? use the midpoint method and specify answers to one decimal place.

Explanation:

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We know the formula of the price elasticity of demand:

percentage change of quantity demanded/percentage change of price

Given:

So:

= %ΔD / %ΔP

= (ΔD/ (D1+D2) ) / (ΔP/ (P1+P2))

= (181-175) / ( 157+181 ) : (3.05 -2.65)/ ( 3.05 +2.65 )

= : = 0.24

=  %ΔO / %ΔP

=  (ΔO/ (O1+O2) ) / (ΔP/ (P1+P2))

= (273-485) / ( 273+485) : (3.05 -2.65)/ ( 3.05 +2.65 )  

= : =- 3.9

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