Supposed the used bookstore sells 70 economics books per month at $15.00 each. If they lower the price to $7.00 each, they sell 90. If so, the price elasticity of demand for economics books, calculated using the midpoint method is

The answer is 0.34 (inelastic)

Explanation:

The Price Elasticity of Demand (PED) is a measure of how much the quantity of a good or service changes, relative to the change in the price of the good or service.

Mathematically, it is represented as:

PED = (% change in quantity demanded) ÷ (% change of price)

% change in quantity demanded =

% change in price =

where:

Q₁ = initial quantity demanded = 70

Q₂ = new quantity demanded = 90

P₁ = initial price = $15

P₂ = new price = $7

Therefore:

% change in quantity demanded =

=25%

% change in price =

= -72.73%

∴ PED = (25%) ÷ (-72.73%) = -0.34.

since PED is less than 1, it is referred to as inelastic.

if PED is greater than 1, it is elastic

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