Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 7

When the price of a bar of chocolate is $1, demand is 100,000 bars. When the price rises to $1.50, demand falls to 60,000 bars. Calculate the price elasticity of demand according to the instructions below and express your answer in absolute value.
a. Suppose price increases from $1 to $1.50. Calculate the price elasticity of demand in terms of percent change, as described on pages 79-80.
b. Suppose price decreases from $1.50 to $1. Calculate the price elasticity of demand in terms of percent change, as described on pages 79-80.
c. Suppose the price increases from $1 to $1.50. Calculate the price elasticity of demand using the mid-point method.
d. Suppose the price decreases from $1.50 to $1. Calculate the price elasticity of demand using the mid-point formula.