Answer:
The correct answer is 0.41.
Explanation:
According to the scenario, the computation of the given data by using mid point formula are as follows:
Price elasticity = (Change in quantity demanded ÷ average of quantity demanded) ÷ (percentage change in price ÷ average of quantity demanded)
where,
Change in quantity demanded can be calculated as:
= Q2 - Q1
= 105 - 100
= 5 millions
And, average of quantity demanded can be calculated as:
= (105 + 100) ÷ 2
= 102.5
Change in price can be calculated as:
= P2 - P1
= $90 - $80
= -$10
And, average of price can be calculated as:
= ($90 + $80) ÷ 2
= 85
By putting the following value in the formula, we get:
= (5 ÷ 102.5) ÷ ($10 ÷ 85)
= 0.41
Hence, the price elasticity of supply using the midpoint method is 0.41.
