If a 10% rise in price causes a 5% decrease in the quantity demanded of
ECONOMICS
JAMB 2014
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
Correct Answer: A. unitary elastic
Explanation
Elasticity of demand refers to how sensitive the demand for a good is to changes as prices and consumer income change. From the question above, the demand is inelastic. An inelastic demand is one in which the change in quantity demanded due to a change in price is small. From the question, price changed by 10%, but quantity demanded only changed by 5%.
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