## Calculating Elasticity and Percentage Changes

Read this article on how to estimate elasticity. Make sure to answer the "Try It" questions.

### Try It

#### Answer to Try It

1.

- 6/9 or 67%

Incorrect. This uses the wrong variables in the equation which is the change in price/price. The calculation would be the change in price or difference between $6 and $9 divided by the price or $6. So $3/$6=1/2 or .50 or 50%. - 3/9 or 33%

Incorrect. This uses the wrong variables in the equation which is the change in price/price. The calculation would be the change in price or difference between $6 and $9 divided by the price or $6. So $3/$6=1/2 or .50 or 50%. - 3/6 or 50%

Correct. The calculation would be the change in price or difference between $6 and $9 divided by the price or $6. So $3/$6=1/2 or .50 or 50%.

2.

- assumes the profit does not change with a price increase.

Incorrect. The midpoint (arc) approach allows for more accuracy because it uses the average price and average quantity over the price and quantity change to calculate elasticity of demand. - give the same answer regardless of which price and which quantity should be in the denominator.

Correct. The midpoint (arc) approach allows for more accuracy because it uses the average price and average quantity over the price and quantity change to calculate elasticity of demand. - allows only elasticity values that are higher than 1.0.

Incorrect. The midpoint (arc) approach allows for more accuracy because it uses the average price and average quantity over the price and quantity change to calculate elasticity of demand.