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WAEC Economics 1997 Question 7

Question 7

Elasticity

When the price of a given product is reduced from N100 to N90, the quantity demanded increases from 50 to 60 units. From this we can conclude that the product's

  1. A.demand is elastic
  2. B.demand is inelastic
  3. C.demand is perfectly inelastic
  4. D.supply is not elastic
  5. E.demand has declined
Show the answer and explanation

Answer: A (demand is elastic)

Explanation

Price falls by 10% but quantity demanded rises by 20%, so Ed = 20 ÷ 10 = 2, which is greater than 1: demand is elastic.