You are the owner-manager of the Alt Heidelberg Restaurant. One entree on the me

Question

You are the owner-manager of the Alt Heidelberg Restaurant. One entree on the menu is Steak Tartar Heidelberg. Last year this time, sales were 400 per week at $20 each. On the basis of a survey, you have determined that increasing the price to $22, ceteris paribus, would decrease the quantity demanded to 380 per week.
Use the midpoint formula to calculate the price elasticity of demand coefficient (ED) over the relevant price range. You are the owner-manager of the Alt Heidelberg Restaurant. One entree on the menu is Steak Tartar Heidelberg. Last year this time, sales were 400 per week at $20 each. On the basis of a survey, you have determined that increasing the price to $22, ceteris paribus, would decrease the quantity demanded to 380 per week.
Use the midpoint formula to calculate the price elasticity of demand coefficient (ED) over the relevant price range. You are the owner-manager of the Alt Heidelberg Restaurant. One entree on the menu is Steak Tartar Heidelberg. Last year this time, sales were 400 per week at $20 each. On the basis of a survey, you have determined that increasing the price to $22, ceteris paribus, would decrease the quantity demanded to 380 per week.
Use the midpoint formula to calculate the price elasticity of demand coefficient (ED) over the relevant price range.

Explanation / Answer

According to the midpoint formula, the price elasticity of demand coefficient (ED) is given by

= (Q2 - Q1)/((Q1 + Q2)/2) divided by (P2 - P1)/((P1 + P2)/2)

= (380 - 400)/((380 + 400)/2) divided by (22 - 20)/((20 + 22)/2)

= -0.538

= -0.54.

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