The price of a good rises from Rs. 10 to Rs. 12, while its quantity demanded falls from 100 units to 80 units. Using the midpoint method, the price elasticity of demand is approximately:
Correct answer: C. 1.2
- A. 0.5
- B. 0.8
- C. 1.2
- D. 2.0
Explanation
The percentage change in quantity is 20 divided by 90, while the percentage change in price is 2 divided by 11. Their ratio is approximately 1.2, so demand is elastic over this range.
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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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