Calculating the price elasticity of demand: A step-by-stepguide Suppose that during the past year, the price of a virtual reality headset rose from $4,100 to $4,550. During the same time period, consumer sales decreased from 420,000 to 313,000 headsets. Calculate the elasticity of demand between these two price–quantity combinations by using the following steps. After each step, complete the relevant part of the table with the appropriate answers. (Note: For decreases in price or quantity, enter values in the Change column with a minus sign.) Original New Average Change Percentage Change Quantity Price Step 1: Fill in the appropriate values for original quantity, new quantity, original price, and new price. Step 2: Calculate the average quantity by adding the original quantity and the new quantity, and then dividing by two. Do the same for the average price. Step 3: Calculate the change in quantity by subtracting the original quantity from the new quantity. Do the same for the change in price. Step 4: Calculate the percentage change in quantity demanded by dividing the change in quantity by the average quantity. Do the same to calculate the percentage change in price. Step 5: Calculate the price elasticity of demand by dividing the percentage change in quantity demanded by the percentage change in price, ignoring the negative sign. Using the midpoint method, the elasticity of demand for headsets is about .

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

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Calculating the price elasticity of demand: A step-by-stepguide

Suppose that during the past year, the price of a virtual reality headset rose from $4,100 to $4,550. During the same time period, consumer sales decreased from 420,000 to 313,000 headsets.

Calculate the elasticity of demand between these two price–quantity combinations by using the following steps. After each step, complete the relevant part of the table with the appropriate answers. (Note: For decreases in price or quantity, enter values in the Change column with a minus sign.)

	Original	New	Average	Change	Percentage Change
Quantity
Price

Step 1: Fill in the appropriate values for original quantity, new quantity, original price, and new price.

Step 2: Calculate the average quantity by adding the original quantity and the new quantity, and then dividing by two. Do the same for the average price.

Step 3: Calculate the change in quantity by subtracting the original quantity from the new quantity. Do the same for the change in price.

Step 4: Calculate the percentage change in quantity demanded by dividing the change in quantity by the average quantity. Do the same to calculate the percentage change in price.

Step 5: Calculate the price elasticity of demand by dividing the percentage change in quantity demanded by the percentage change in price, ignoring the negative sign.

Using the midpoint method, the elasticity of demand for headsets is about .

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