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WAEC Economics 2013 Paper

Question : 46

Total: 46

Which of the following can be used to calculate the price elasticity of demand?

$\frac{\text{percentage change in quatity demand}}{\text{percentage change in price}}$
$\frac{\text{percentage change in price}}{\text{percentage change inquantity demand}}$
$\frac{\text{percentage change in quality demand}}{\text{percentage change in income}}$
$\frac{\text{percentage change in income}}{\text{percentage change in quantity demand}}$

Solution:

Concept:

Price elasticity of demand measures how strongly quantity demanded responds to a change in price.

Explanation:

It is the ratio of the percentage change in quantity demanded to the percentage change in price.

So, the correct formula is:

\text{Price Elasticity of Demand} = \frac{\%\ \text{change in quantity demanded}}{\%\ \text{change in price}}

Option A matches this formula.

Options B, C, and D invert this ratio or incorrectly use income instead of price.

Answer:

\frac{\text{percentage change in quantity demanded}}{\text{percentage change in price}}

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