demanded. A 10% decreasein the price will result in only a 4.5% increasein the quantity demanded. Price

elasticities of demand are negative numbers indicating that the demand curve is downward sloping, but we

read them as absolute values. The following Work It Out feature will walk you through calculating the price

elasticity of demand.

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5.1 • Price Elasticity of Demand and Price Elasticity of Supply 115

WORK IT OUT

Finding the Price Elasticity of Demand
Calculate the price elasticity of demand using the data in Figure 5.2 for an increase in price from G to H. Has the

elasticity increased or decreased?

Step 1. We know that:

Step 2. From the Midpoint Formula we know that:

Step 3. So we can use the values provided in the figure in each equation:

Step 4. Then, we can use those values to determine the price elasticity of demand:

Therefore, the elasticity of demand from G to is H 1.47. The magnitude of the elasticity has increased (in
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