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JAMB Economics 2000 Question 7

Question 7

Elasticity

When commodity X sold for ₦25 per unit, 50 units of commodity Y were purchased. With an increase in the price of commodity X to ₦50 per unit, the demand for commodity Y fell to 20 units.
Determine the cross elasticity of demand

  1. A.1.7
  2. B.0.6
  3. C.−0.6
  4. D.−1.7
Show the answer and explanation

Answer: C (−0.6)

Explanation

% change in quantity of Y = (20 − 50)/50 × 100 = −60%. % change in price of X = (50 − 25)/25 × 100 = 100%. Cross elasticity = −60 ÷ 100 = −0.6.