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Ch. 4 - ElasticityWorksheetSee all chapters

# Elasticity and the Midpoint Method

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Sections
Percentage Change and Price Elasticity of Demand
Elasticity and the Midpoint Method
Price Elasticity of Demand on a Graph
Determinants of Price Elasticity of Demand
Total Revenue Test
Total Revenue Along a Linear Demand Curve
Income Elasticity of Demand
Cross-Price Elasticity of Demand
Price Elasticity of Supply
Price Elasticity of Supply on a Graph
Elasticity Summary

Concept #1: The Midpoint Method

Practice: The price of widgets is currently $44 with a quantity demanded of 200,000 units. If the price decreases to$36, the quantity demanded increases 280,000. Using the midpoint method, what is the price elasticity of demand? Is demand elastic or inelastic?

Practice: The price of a good rises from $8 to$12, and the quantity demanded falls from 110 to 90 units. Using the midpoint method, what is the price elasticity of demand?

Practice: Assume that the price elasticity of demand for cigarettes is 0.4. 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?