Given the figures below : Price of commodity A in January = N5.00 Price of commodity A in February = N7.00 Quantity of A bought in January = 20 kg Quantity of A bought in February = 16 kg (a) Calculate: (i) Percentage change in quantity bought (% ) (ii) Percentage change in price of A (% ) (iii) Coefficient of price elasticity of demand (e) (b) From your answer: (i) is the demand elastic or inelastic? (ii) How do you know this?
Explanation
Month
Price
Quantity Demanded
January
N5
20k
Febuary
N7
16k
(a) (i) Percentage change in quantity demanded: = 20% Note 20kg - 16kg = 4kg (ii) Percentage change in price of A: x 100 = 40% (iii) Co-efficient of price elasticity ED = Percentage change in quantity demanded Percentage change in Price = or 0.5 ED = 0.5 Atternatively use Calculus. ED = dQ = 20 - 16 = 4 dp = 7 - 5 =2 or 0.5
