alleryA 5% fall in the price of a good leads to a 15% rise in its quantity demanded. The coefficient of price elasticity of demand is:
A0.75
B0.33
C10
D3
Answer & Solution
Correct answer: D. 3
1. Use $E_p = \dfrac{\%\ \text{change in quantity}}{\%\ \text{change in price}}$.
2. Substitute: $E_p = \dfrac{15\%}{5\%}$.
3. This equals 3 (ignoring the negative sign by convention).
4. So the elasticity coefficient is 3, indicating elastic demand.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit I "Law of Demand and Elasticity of Demand", p.18_
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