Price falls from ₦50 to ₦40 while quantity demanded rises from 40 units to 80 units. Calculate elasticity of demand:
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Correct Answer: Option C
Explanation:
Formula:<br/>PED =<br/>% Change in Quantity Demanded ÷ % Change in Price Quantity demanded changed from 40 to 80:<br/>Change = 40 % Change in Quantity Demanded =<br/>40/40 × 100 = 100% Price changed from ₦50 to ₦40:<br/>Change = 10 % Change in Price =<br/>10/50 × 100 = 20% PED = 100% ÷ 20% = 5 Demand is highly elastic because consumers reacted strongly to the fall in price.
Formula:<br/>PED =<br/>% Change in Quantity Demanded ÷ % Change in Price Quantity demanded changed from 40 to 80:<br/>Change = 40 % Change in Quantity Demanded =<br/>40/40 × 100 = 100% Price changed from ₦50 to ₦40:<br/>Change = 10 % Change in Price =<br/>10/50 × 100 = 20% PED = 100% ÷ 20% = 5 Demand is highly elastic because consumers reacted strongly to the fall in price.