posted by Mike on .
Here is a question that my professor posted...
"Assume the price elasticity of demand for U.S. Frisbee. frisbees is -0.6. If the company increases the price of each frisbee from $6 to $8, the number of frisbees sold will:"
The answer is: Decrease by 17.1 percent
What I would like to know is how she got to this answer? I have been trying every formula I can think of and nothing is working.
Your prof used the mid-point method for calculating percentage change.
Price changed by 2 from 6 to 8. Calculate the pct change from the mid-point. i.e., 2/7 = .2857
.2867 * 0.6 = .1714