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If a 10 rise in price causes a 5 decrease in th... - JAMB Economics 2014 Question

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
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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.

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