I'm at a very basic level of economics (highschool), so what I write may not be very coherent, i'm just a bit confused and I can't get any book or source to awnser the question I have.
See, the problems (excercises) I have ask me for the PED and the data they give me to obtain it is two points. For example:
In october the price for cigarretes was 5 USD and the Quantity demanded was 1000 packs, in december the price for cigarretes increased to 6 USD and the quantity demanded decreased to 500 packs. Calculate the price elasticity of demand:
%ΔP= 1/5 %ΔD=-500/100=
I'm using PED = %ΔD/%ΔP
Using the midpoint method the awnser would be
Using this first method (not midpoint method) I dont understand for which point im getting the PED, since PED is different at each point of the curve. Is it perhaps the average PED between those points? Otherwise, what is it?
Also, what is the difference between the first method and the midpoint method?.
And finally, if they tell that a product has an elasticity of for example PED= -0.5, why is it that I can say that if I rase the price 1 % the the demand decreases -0.5? Because by raising the price 1% the elasticity has already changed (since elasticity is different at each point of the demand curve) and hence, I cant use that previous elasticity of -0.5 to find out the the demand decrease .
Thanks in advance, and sorry if the question doesn't make any sense.