(a) Define price elasticity. (b) If at N 8.00 per tuber, twenty tubers were demanded
ECONOMICS
WAEC 1992
(a) Define price elasticity.
(b) If at N 8.00 per tuber, twenty tubers were demanded and when the price fell to N 6. 00 per tuber, thirty tubers were demanded, what is the elasticity of the demand?
Explanation
(a) Price elasticity is the degree of responsiveness of demand or supply to a small change in price. The formula is:
%D od or Qs
% D Price
| price | Quantity demanded |
| N8 N6 | 20 tubers 30 tubers |
Formula =% change in quantity demanded
% change in price
% change in quantity demanded (30 -20) =10
=\(\frac{10}{20} x 100 =50%
%change in price (8 - 6 )= 2
= \(\frac{2}{8} \times \frac{100}{1}\) = 25%
Elasticity of demand = \(\frac{50} {25}\) = 2
Demand is elastic because two is greater than one.
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