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Why do economists use the midpoint method rather than a simple percentage change when calculating elasticity?
AIt gives the same elasticity between two points whether price rises or falls
BIt converts every percentage change into a dollar change
CIt only works for supply curves, never for demand curves
DIt gives a different answer for a price rise than for a price fall
Answer & Solution
Correct answer: A. It gives the same elasticity between two points whether price rises or falls
1. The midpoint method replaces the usual starting-point base with the average of the two values being compared.
2. Because it uses that same average base regardless of direction, it produces one consistent elasticity value whether price rises or falls between the two points.
3. A simple percentage change would use a different base depending on direction, giving two different answers for the same interval, which is what option D wrongly claims is the advantage.
4. The method applies to both demand and supply calculations, not to supply alone, which rules out option C.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 5 "Elasticity", section 5.1 | Price Elasticity of Demand and Price Elasticity of Supply_
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