Question 3
MediumOriginal questionThe price of a good falls from ₹10 to ₹8 and its quantity demanded rises from 40 to 50 units. What is the price elasticity of demand?
Show the answer and explanation
CorrectNot quiteAnswer B
Correct answer: B
Explanation
% change in quantity = (50 − 40) ÷ 40 × 100 = 25%.
% change in price = (8 − 10) ÷ 10 × 100 = −20%.
eₚ = 25 ÷ 20 = 1.25 (ignoring the sign).
Worth noting
0.8 inverts the ratio: price change over quantity change.
- Concept
- Computing elasticity from a price fall
- Typical timeTypical
- 70 s
- Your timeYours
- —
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