In Small Town, the cable TV subscription price increases from Rs 30 to Rs 40 per month, causing the number of subscribers to drop from 30,000 to 20,000. Using the midpoint formula, what is the price elasticity of demand for cable television in this town?
Explanation
The price elasticity of demand calculated using the midpoint method is 1.4, indicating that the demand is elastic. This means the percentage change in quantity demanded is greater than the percentage change in price.