Question

If, when the price of a product rises from $2 to $3, the quantity demanded of the product decreases from 600 to 400, the price elasticity of demand coefficient, using the midpoint formula, is:

Answer 1

Price elasticity of demand is often talked about when the demand for a good is sensitive to pricing. The equation is,
n = ((Q1 - Qo)/(Q1 + Qo)) / ((P1 - Po)/(P1 + Po))
Substituting the known values,
n = ((400 - 600)/(400 + 600)) / ((3 - 2)/(3 + 2))
n = -1
Thus, the price elasticity of demand is -1.