Answer:
-1.67
Explanation:
Price elasticity of demand using midpoint method can be formulated as below:
Price elasticity of demand = {(Q_2 - Q_1)/[(Q_2 + Q_1)/2]}/{(P_2 - P_1)/[(P_2 + P_1)/2]}, where:
Q_1 and Q_2 are the volumes before and after price changes;
P_1 is initial price and P_2 is new price.
Putting all the numbers together, we have:
Price elasticity of demand = {(50-100)/[(50+100)/2]}/{(3-2)/([(3+2)/2]} =
- 1.67
Note: Negative sign indicate that when price increases volume will decrease.
