Question : Statement 1: The midpoint formula is used to calculate price elasticity of demand when price changes between two points on the demand curve.
Statement 2: The midpoint formula divides the percentage change in quantity demanded by the average percentage change in price.
Option 1: Both statements are true.
Option 2: Both statements are false.
Option 3: Statement 1 is true, and statement 2 is false.
Option 4: Statement 1 is false, and statement 2 is true.
Correct Answer: Both statements are true.
Solution : The correct answer is (A) Both statements are true.
Statement 1: The midpoint formula is used to calculate price elasticity of demand when price changes between two points on the demand curve.
This statement is true. The midpoint formula is a commonly used method to calculate the price elasticity of demand. It is especially useful when calculating elasticity between two points on a demand curve where there is a change in price. The midpoint formula takes into account the average of the initial and final price and quantity values.
Statement 2: The midpoint formula divides the percentage change in quantity demanded by the average percentage change in price.
This statement is also true. The midpoint formula for calculating price elasticity of demand involves dividing the percentage change in quantity demanded by the average percentage change in price. This formula provides a more accurate measure of elasticity as it eliminates the bias that can occur when using different initial and final price points.
Therefore, both statements are true.
