00:01
Hello.
00:03
In this example we will use the midpoint formula, the midpoint method.
00:09
And first let's calculate the price elasticity of demand.
00:17
When price increased from 10 to 12, so price is going from 10 to 12, and income is 20 ,000, 20k.
00:36
So let's look at a lot of what will happen in this case.
00:40
The quantity demanded after this increase in the price will be 24 is equal to 24 minus the old quantity which is 32.
00:53
We divide this by the midpoint or the number which is the average number of these two and we divide by the change in the price.
01:03
The new price is 12, the old price is 10, at the midpoint is 11.
01:11
And if we calculate, our answer will be negative 1 .57.
01:20
Now let's calculate the price elasticity of demand, the same change in the price, but now income is 24 ,000.
01:35
So now we have another change in quantity.
01:41
So the new quantity is 30 the old one is 45 we divide this by the midpoint which is 37 .5 and we divide by the same change in the price and as a result our our price elasticity of demand would be negative 2 point okay, now let's calculate the income elasticity of demand when income changes from 20 ,000 and in the first case, price is equal to 12...