Price increases from 10 to 12 pence and the price elasticity of demand is -0.5 The quantity demanded was 500 units. What will it be now ?
Correct answer: C. 450 units
- A. 550 units
- B. 500 units
- C. 450 units
- D. 490 units
Explanation
The 20% price rise multiplied by elasticity of -0.5 causes a 10% fall in quantity demanded. Ten percent of 500 units is 50, leaving 450 units.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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