Price Elasticity of Demand Using Midpoint Method

Steps:

• Find average price: (10 + 30)/2 = 20 US$.
• Calculate % change in price: (30 - 10)/20 × 100% = 100%.
• Find average quantity demanded: (50 + 30)/2 = 40 kg.
• Calculate % change in quantity demanded: (30 - 50)/40 × 100% = -50%; PED = |-50%/100%| = 0.5.

Why B is correct:

• PED equals 0.5 per the midpoint formula, measuring responsiveness of demand to price change.

Why the others are wrong:

• A: Results from using initial values (|-40%/200%| = 0.2, rounded up incorrectly).
• C: Assumes unit elasticity, where % changes are equal (not the case here).
• D: Indicates elastic demand (>1), but actual value is 0.5.

Final answer: B