The midpoint formula for calculating elasticity
First, you calculate the percent change in quantity demanded and the percent change in price. The
midpoint formula does this by taking the change in quantity demanded (or price) and dividing it by the
average of the old and new quantities (or prices).
% change in Qd =
±² ³
´ ³µ ±¶·±
¸ ¹ºº»
% change in P =
¼±²¼³
´¼³µ¼±¶·±
¸ ¹ºº»
The reason you divide by the average of the old and new quantities is this: if you use the old quantity as
the denominator you will get a different percent change than if you use the new quantity as the
denominator. For example if the price increases from $10 to $15, we would say this is a 50% change
because (1510)/10 x 100%=50%. But if the price decreases from $15 to $10, we would say the price
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This note was uploaded on 09/26/2011 for the course 06E 001 taught by Professor Stuff during the Fall '10 term at University of Iowa.
 Fall '10
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