Chapter 4, Problem 10P

Economists estimate price elasticities more precisely by using average price and quantity to compute percentage changes. Thus,

$E=\frac{Q_2-Q_1}{\frac{Q_1+Q_2}{2}}÷\frac{P_2-P_1}{\frac{P_1+P_2}{2}}$ , in absolute value

Using this formula, compute E for a popcorn price increase from 15 cents to 25 cents per ounce (Figure 4.4).