If the quantity demanded of a commodity increases from 20 to 30 when
there is an increase in price from N4 to N5, the elasticity of deman
is_______
Answer Details
The elasticity of demand can be calculated using the formula:
Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
We can calculate the percentage change in quantity demanded as:
% Change in Quantity Demanded = ((New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded) x 100%
% Change in Quantity Demanded = ((30 - 20) / 20) x 100%
% Change in Quantity Demanded = 50%
We can calculate the percentage change in price as:
% Change in Price = ((New Price - Old Price) / Old Price) x 100%
% Change in Price = ((5 - 4) / 4) x 100%
% Change in Price = 25%
Substituting these values in the formula, we get:
Elasticity of Demand = 50% / 25%
Elasticity of Demand = 2
Therefore, the elasticity of demand is 2.