need clear answers 1Suppose if the price of a good is 12 the

***need clear answers***

1.Suppose if the price of a good is $12, the quantity demanded is 50 units; when the price is $10, the quantity demanded is 100 units. Use the midpoint approach to compute the price elasticity of demand. Is demand at this point relatively responsive or relatively unresponsive to price changes?

Solution

Original price: $ 12 New Price: $10. Change in price: -2 Average Price: 11 % Change in price: -2/11 *100= -18.18% Original Demand: 50 New demand: 100 Change in demand: 50 Average demand: 75 % Change in demand: 50/75*100 = 66.67% Price Elasticity of demand: % Change in demand/ % change in supply 66.67% / -18.18% = -3.67 As the price elasticiity is -3.66, that measn the demand is very responsive to the price.