Saarland Abitur Economics And Business Practice Questions - Saarland Abitur Economics And Business (Wirtschaftslehre) Exam - Variant 2

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A good's price rises from €10 to €12 (a 20% increase), causing quantity demanded to fall from 100 to 80 units (a 20% decrease). What is the price elasticity of demand, and how would it be classified?

Elasticity = 1 (unit elastic), since %ΔQd (-20%) divided by %ΔP (20%) equals -1, with the good classified as unit elastic Elasticity = 0, meaning the good is perfectly inelastic Elasticity = 20, an incorrect calculation multiplying rather than dividing the percentages Elasticity cannot be calculated without knowing the good's absolute price level

Correct Answer:

Elasticity = 1 (unit elastic), since %ΔQd (-20%) divided by %ΔP (20%) equals -1, with the good classified as unit elastic

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