Question on: JAMB Economics - 2024
If the prices of a commodity increases from N8.00 to N10.00 and the demand decreases from 100 to 80 respectively, what is the price elasticity of demand for the commodity?
A
1
B
0.8
C
0.5
D
1.5
Ask EduPadi AI for a detailed answer
Correct Option: B
The price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated using the following formula:
\[PED = \frac{\% \text{ Change in Quantity Demanded}}{\% \text{ Change in Price}}\]
Here's how to calculate it for this question:
- Calculate the percentage change in quantity demanded:
Change in quantity = 80 - 100 = -20
Average quantity = (100 + 80) / 2 = 90
% Change in Quantity Demanded = (-20 / 90) * 100 ≈ -22.22% - Calculate the percentage change in price:
Change in price = 10 - 8 = 2
Average price = (8 + 10) / 2 = 9
% Change in Price = (2 / 9) * 100 ≈ 22.22% - Calculate the Price Elasticity of Demand (PED):
PED = (-22.22%) / (22.22%) = -1
The absolute value of PED is 1. Therefore, the answer is 1.
Add your answer
Please share this, thanks!
No responses