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JAMB Economics 2018 Paper

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Question : 24

Total: 85

If the price of a ball point pen falls from N1.00 to N0.60 and the quantity demanded increases. from 200 to 300, the point elasticity of demand is equal to____________

0.50
0.40
1.25
0.80

Solution:

Concept:

Point elasticity of demand uses the original price and original quantity as the base for calculation.

Explanation:

Original price

P = 1.00

, new price =

0.60

.

Original quantity

Q = 200

, new quantity =

300

.

Change in price

\Delta P = 0.60 - 1.00 = -0.40

Change in quantity

\Delta Q = 300 - 200 = 100

\text{Point elasticity} = \frac{\Delta Q}{\Delta P} \times \frac{P}{Q}

= \frac{100}{-0.40} \times \frac{1.00}{200} = -1.25

Ignoring the negative sign, elasticity is

1.25

.

Answer:

C. 1.25

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