Answer to Question #4723 in Microeconomics for Tom

Question

I know that the midpoint formula I am to use looks like this
(Q2-Q1)/ ([Q2+Q1]/2)
-------------------------- =Ep
(P2-P1)/ ([P2+P1]/2)

I know it can be reduced to
(P2+P1)(Q2-Q1)
------------------- = Ep
(P2-P1)(Q2+Q1)

I was wondering if it was possible to reduce the equation any more then this?

Thank you,
Tom

Answer 1

This is the most simple equation, as the meaning of elasticity is the ability of
price to change due to the change of quantity of product. That's why the
simplest formula is the last that you mentioned. So you need prices P1, P2 and
quantities Q1, Q2 to calculate Ep using your formula.