Question

If the price of a commodity falls by 10%, its demand decreases by 25%. The elasticity of demand would be:

Options

• 1.5

• −2.5

• 0.25

• 0.15

Answer 1

−2.5

Explanation:

Price Elasticity Demand (E_d) = `- ((% "Change in quantity demamded")/(% "Change in price"))`

Ed = `- ((-25%)/(-10%))`

= − (2.5)

E_d = −2.5