Determine the price elasticity of demand if the price of yam tuber rises by 10% (0.1) and the quantity demanded falls by 5% (0.05)

Answer Details

The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, the percentage change in price is 10% (0.1) and the percentage change in quantity demanded is -5% (-0.05) because the quantity demanded falls when the price rises. Therefore, the price elasticity of demand is: |-0.05 / 0.1| = 0.5 The answer is option (A) 0.5.