SACE Stage 2 Economics Practice Questions - SACE Stage 2 Economics External Assessment Exam

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If the price of a solar panel system decreases by 10% and the quantity demanded increases by 25%, what is the Price Elasticity of Demand (PED) and how is demand classified?

PED = -0.4; demand is inelastic. PED = -2.5; demand is elastic. PED = -1.5; demand is unit elastic. PED = -25.0; demand is perfectly elastic.

Correct Answer:

PED = -2.5; demand is elastic.

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