The price of notebooks is $5, and at that price consumers demand 12 notebooks. If the price rises to $7, consumers will decrease consumption to 4 notebooks. Using the midpoint formula, what is the price elasticity of demand for notebooks?

-3.03

Step-by-step explanation:

Given that,

Initial price = $5

Initial demand = 12 units

New price = $7

New demand = 4 units

Average demand:

= (Initial demand + New demand) ÷ 2

= (12 + 4) ÷ 2

= 8 units

Average price = (Initial price + New price) ÷ 2

                        = ($5 + $7) ÷ 2

                        = $6

Percentage change in quantity demand:

= Change in demand ÷ Average demand

= (4 - 12) ÷ 8

= - 8 ÷ 8

= -1%

Percentage change in price:

= Change in price ÷ Average price

= ($7 - $5) ÷ $6

= $2 ÷ $6

= 0.33%

Therefore, the price elasticity of demand is as follows:

= Percentage change in quantity demand ÷ Percentage change in price

= -1 ÷ 0.33

= -3.03

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