When the price of a bar of chocolate is $1.00, the quantity demanded is 100,000 bars. When the price rises to $1.50, the quantity demanded falls to 60,000 bars. Calculate the price elasticity of demand using the mid-point method. Instructions: Round your answers to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. Suppose the price increases from $1.00 to $1.50. The price elasticity of demand is: -1.25 . b. Suppose t

Answer:a. -1.25b. -1.25Explanation: Price elasticity is used to measure the change in demand as a result of a change in price. Formula is;= % change in Quantity/ % change in Pricea. Suppose the price increases from $1.00 to $1.50. The price elasticity of demand is:% change in Quantity using the midpoint formula;[tex]=\frac{Q2 - Q1}{\frac{Q1 + Q2}{2} } \\\\= \frac{60,000 - 100,000}{\frac{100,000 + 60,000}{2}} \\\\= -0.5[/tex]% Change in Price using midpoint formula[tex]=\frac{P2 - P1}{\frac{P1 + P2}{2} } \\\\= \frac{1.5 - 1.00}{\frac{1.00 + 1.50}{2} } \\\\= 0.4[/tex]= -0.5/0.4= -1.25b. Suppose the price decreases from $1.50 to $1.00. The price elasticity of demand is:% change in Quantity using the midpoint formula;[tex]=\frac{Q2 - Q1}{\frac{Q1 + Q2}{2} } \\\\= \frac{100,000 - 60,000}{\frac{100,000 + 60,000}{2}} \\\\= 0.5[/tex]% Change in Price using midpoint formula[tex]=\frac{P2 - P1}{\frac{P1 + P2}{2} } \\\\= \frac{1.00 - 1.50}{\frac{1.00 + 1.50}{2} } \\\\= -0.4[/tex]= 0.5/-0.4= -1.25