Month | Price | Quantity Demanded |
January | N5 | 20k |
Febuary | N7 | 16k |
(a) (i) Percentage change in quantity demanded:
\(\frac{4}{20} \times \frac{100}{1}\) = 20%
Note 20kg - 16kg = 4kg
(ii) Percentage change in price of A:
\(\frac{2}{5}\) x 100 = 40%
(iii) Co-efficient of price elasticity
ED =
Percentage change in quantity demanded Percentage change in Price
\(\frac{20%}{40%}\) = \(\frac{1}{2}\) or 0.5
ED = 0.5 Atternatively use Calculus.
ED = \(\frac{dq}{dp} \times \frac{p}{q}\)
dQ = 20 - 16 = 4
dp = 7 - 5 =2
\(\frac{4}{20} \times \frac{ 5}{2}\)
\(\frac{20}{40} = \frac{1}{2}\) or 0.5