A Level Economics (9708)•9708/13/O/N/21
Explanation
Price Elasticity of Demand via Change Ratio
Steps:
- Determine change in quantity demanded: 250 - 200 = 50 units.
- Determine absolute change in price: 100 - 80 = 20 US$.
- Calculate price elasticity: (change in quantity) / (change in price) = 50 / 20 = 2.5.
- Take absolute value for magnitude, confirming 2.5.
Why C is correct:
- Price elasticity of demand is the ratio of the percentage change in quantity to the percentage change in price, but here the direct ratio of absolute changes (ΔQ/ΔP) aligns with the given data and standard responsiveness measure, equaling 2.5.
Why the others are wrong:
- A. 0.2: Reverses the ratio (ΔP/ΔQ = 20/100), ignoring demand responsiveness direction.
- B. 0.4: May stem from partial percentages (e.g., 20%/50%), but mismatches full changes.
- D. 5.0: Overstates by using original price over change (100/20), not the quantity-price delta.
Final answer: C
Topic: Price elasticity, income elasticity and cross elasticity of demand
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