Question on: JAMB Economics - 2014
If a 10% rise in price causes a 5% decrease in the quantity demanded of a commodity, the elasticity of demand is
A
unitary elastic
B
zero elastic
C
elastic
D
inelastic
Ask EduPadi AI for a detailed answer
Correct Option: C
The price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated as:
Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)
In this case:
* % Change in Quantity Demanded = -5%
* % Change in Price = 10%
Elasticity of Demand = -5% / 10% = -0.5
Since the absolute value of the elasticity of demand (|-0.5| = 0.5) is less than 1, the demand is considered inelastic.
Add your answer
Please share this, thanks!
No responses