Suppose between 2015 and 2016 there were 3,000 car parks available for use at UQ. In 2015, the price of a car park was $4 per day and during teaching periods 98% of these parks were taken by 8 am. At the beginning of 2016, the price of a car park was increased to $5 per day and during teaching periods 78% of these parks were taken by 8am. It cannot be assumed that the demand curve is linear. Calculate the midpoint price elasticity of demand for car parks at UQ. Round your answer to the nearest two decimal places, giving a positive value for elasticity.
Question
Suppose between 2015 and 2016 there were 3,000 car parks available for use at UQ. In 2015, the price of a car park was 5 per day and during teaching periods 78% of these parks were taken by 8am. It cannot be assumed that the demand curve is linear. Calculate the midpoint price elasticity of demand for car parks at UQ. Round your answer to the nearest two decimal places, giving a positive value for elasticity.
Solution
To calculate the midpoint price elasticity of demand, we use the formula:
% change in quantity demanded / % change in price
First, we calculate the % change in quantity demanded:
In 2015, 98% of 3000 car parks were taken, which is 2940 car parks. In 2016, 78% of 3000 car parks were taken, which is 2340 car parks.
So, the % change in quantity demanded is: (2340 - 2940) / [(2340 + 2940) / 2] = -0.2564 or -25.64%
Next, we calculate the % change in price:
The % change in price is: (4) / [(4) / 2] = 0.2222 or 22.22%
So, the midpoint price elasticity of demand is: -25.64% / 22.22% = -1.15
Therefore, the midpoint price elasticity of demand for car parks at UQ is 1.15 (we take the absolute value as elasticity is usually expressed as a positive number).
Similar Questions
Suppose the price of product X is reduced from $16.00 to $12.00 and, as a result, the quantity of X demanded increases from 300 to 450. Using the midpoint method, the price elasticity of demand for X in the given price range is:Group of answer choices1.401.000.400.29
Use the data in the table below to answer the following question. Price Quantity Demanded$20 1218 1716 2014 2412 3010 368 406 444 48 The price elasticity of demand (based on the midpoint formula) when price increases from $14 to $16 isMultiple Choice-3.29.-1.37.-1.-0.33.
The figure below represents the weekly demand for GPS units. Instructions: Round your answers to two decimal places. If you are entering a negative number include a minus sign. a. Using the starting point formula, what is the price elasticity of demand for going from a price of $160 per unit to a price of $140 per unit? b. Using the starting point formula, what is the price elasticity of demand for going from a price of $140 per unit to a price of $160 per unit? c. Using the midpoint formula, what is the midpoint price elasticity of demand for GPS units between a price of $140 per unit and a price of $160 per unit? d. Using the starting point formula, what is the price elasticity of demand for going from a price of $40 per unit to a price of $20 per unit? e. Using the starting point formula, what is the price elasticity of demand for going from a price of $20 per unit to a price of $40 per unit? f. Using the midpoint formula, what is the midpoint price elasticity of demand for GPS units between a price of $20 per unit and a price of $40 per unit?
Suppose that the total revenue received by a company selling basketballs is $600 when the price is set at $30 per basketball and $600 when the price is set at $20 per basketball. Without using the midpoint formula, identify whether demand is elastic, inelastic, or unit-elastic over this price range. Demand is multiple choiceinelastic.elastic.unit-elastic.
Say your friend Nick sells skateboards. He sells 30 a week at $150. He then raises his price to $175 and sells 25. Use the midpoint formula to determine a fractional numerical value for the price elasticity of demand.A.24/26B.4/24C.4/143D.22/26E.13/11
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.