Use the table below to answer question 17 and 18.
Market Demand Schedule for Commodity X. \(\begin{array}{c|c}
\text{ Price N} & \text{Quantity(Million units)} \\ 60 & 100 \\
50 & 140 \\
40 & 220 \\
30 & 260 \\
20 & 300 \\
10 & 340 \\
\end{array}\)
If the price of commodity X falls from N40.00 to N30.00 what is the price elasticity of demand?
-
0.62
- 0.73
- 1.00
- 1.50
The correct answer is: A
Explanation
The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price.
Change in quantity demanded = 260 - 220 = 40
percentage change = \(\frac{40}{260}\) = 0.154
Change in price = 40 - 30 = 10
percentage change = \(\frac{10}{40}\) = 0.25
price elasticity = \(\frac{0.154}{0.25}\) = 0.616 approximately 0.62