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JAMB Economics 2014 Question 10

Question 10

Elasticity

If a 10% rise in price causes a 5% decrease in the quantity demanded of a commodity, the elasticity of demand is

  1. A.elastic.
  2. B.inelastic.
  3. C.unitary elastic.
  4. D.zero elastic.
Show the answer and explanation

Answer: B (inelastic.)

Explanation

Elasticity = 5%/10% = 0.5, which is less than 1, so demand is inelastic.