Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?
A) 0.85
B) 1.08
C) 1.17
D) 0.92
Answer: C) 1.17
That means,
Q2 = 60
Q1 = 55
P2 = $6.50
P1 = $7
So,
Ed = [(60 - 55) / {(55 + 60) / 2}] / [($6.50 - $7.00) / {($7.00 + $6.50) / 2}]
Ed = - 1.17
That means the absolute value of Ed is 1.17.
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