The price of cabbage rises from $0.20 per pound to $0.30 per pound. The quantity of cabbage demanded falls from 800 pounds per week to 600 pounds per week. Use the midpoint formula to calculate the price elasticity of demand for cabbage
Is the demand elastic, inelastic, or unit elastic?
percentage change in quantity demanded = [600 – 800]/700 = -200/700 = -28.6
percentage change in price = [$0.30 - $0.20]/$0.15 = $0.10/$0.15 = 66.7
price elasticity of demand = [-28.6]/[66.7] = -0.43
Since the absolute value of the price elasticity of demand is less than one, the demand is inelastic.
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