Question

1. A dealer in deep freezers increased the price of his product from $450 to $500 and sales dropped from 800 units to 600 units a week. Use the information above to answer the questions that follow.
(a)(i) Calculate the price elasticity of demand.

Accepted Answer

Price elasticity of demand = (% change in quantity demanded) / (% change in price).
% change in quantity demanded = (800-600)/800 x 100 = 25%.
% change in price = (450-500)/450... using magnitude: (500-450)/450 x 100 = 11.11%.
∴ Price elasticity of demand = 25%/11.11% = 2.25.

WAEC Economics 2017 Theory — Question 1

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