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When the price of candy bars increased from $0.45 to $0.55, the quantity demanded changed from 21,000 per day to 19,000 per day. In this price range, the price elasticity coefficient (based on the midpoint formula) for candy bars is:________.
1) -1.
2) -2.
3) -0.18.
4) -0.5.

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Answer:

4) -0.5.

Explanation:

The mid point formula for determining the price elasticity coefficient can be calculated using the following formula:

Price elasticity co-efficient=((D2-D1)/(D2+D1/2))/((P2-P1)/(P2+P1/2))

In this question:

D2=19,000, D1=21,000, P2=$0.55, P1=$0.45

Price elasticity co-efficient=((19,000-21,000)/(19,000+21,000/2))/((0.55-0.45)/(0.55+0.45/2))

Price elasticity co-efficient=  -0.50

So based on the above calculation, the answer is 4) -0.5.

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