Suppose that the price of a commodity increase from 90 to 110 and the demand curve shows that the co...........

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Suppose that the price of a commodity increase from ? 90 to ? 110 and the demand curve shows that the corresponding reduction in quantity demanded is from 240 units to 160 units. Then, the coefficient of the price elasticity of demand will be

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1.0

2.4

0.5

2.0

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Explanation:

We know, Coefficient of price elasticity, Ep = (change in quantity/original quantity) * 100 (change in price/original price) * 100

Therefore, we have

Δq = 240-160 = 80 Δp = 110-90 = 20 Where q is quantity, p is price and Δ is the change. Hence, Ep = 80/20 * 80/160 = 4 * 0.5 = 2 Therefore, the Coefficient of price elasticity, Ep = 2

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