ECN 104 Lecture Notes - Lecture 6: Midpoint Method, Demand Curve, Standard-Definition Television
Document Summary
The price elasticity of demand is a measure of sensitivity of the quantity demand to price changes. % change in quantity demanded = (change in quantity demanded/initial quantity demanded) x 100. % change in price = (change in price/initial price) x 100. Price elasticity of demand = % change in quantity demanded / % change in price. % change in quantity demanded = -0. 1 million vaccinations / 10 million vaccinations x. % change in price = / x 100 = 5% Price elasticity of demand = 1% / 5% = 0. 2. Problem with standard definition of price elasticity: elasticity from a to b is different than elasticity from b to a. Solution: the midpoint method is a technique for calculating the percentage changes in prices or quantities. E. g. for prices, calculate price changes relative to the average, or midpoint, of the starting and final prices.