Answer:
Option "C" is the correct answer to the following statement.
Explanation:
Given:
Old price (P0) = $6.50
New Price (P1) = $5.75
Old Quantity (Q0) = 600 units
New Quantity (Q1) = 800 units
Computation of Price elasticity of demand :
Midpoint method:
Price elasticity of demand =
[tex]\frac{\frac{Q1-Q0}{\frac{Q1+Q0}{2} } }{\frac{P1-P0}{\frac{P1+P0}{2} } }[/tex]
[tex]\frac{\frac{800-600}{\frac{800+600}{2} } }{\frac{5.75-6.50}{\frac{5.75+6.50}{2} } }\\\frac{\frac{200}{\frac{1400}{2} } }{\frac{-0.75}{\frac{12.25}{2} } }\\\frac{\frac{200}{700 } }{\frac{-0.75}{6.125} } }\\2.3333[/tex]
Price elasticity of demand = 2.33 (approx)
