This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.
ScanSolve AI Answer
You're on a roll — Step 1: Identify the initial and final prices and quantities. Initial Price (P_1) = N20 Final Price (P_2) = N80 Initial Quantity (Q_1) = 300 units Final Quantity (Q_2) = 500 units Step 2: Use the point elasticity of demand formula. The formula for point elasticity of demand is: E_d = (Q_2 - Q_1)/(Q_1)(P_2 - P_1)/(P_1) Step 3: Calculate the change in quantity and change in price. Change in quantity ( Q) = Q_2 - Q_1 = 500 - 300 = 200 units Change in price ( P) = P_2 - P_1 = 80 - 20 = 60 N Step 4: Substitute these values into the elasticity formula. E_d = (200)/(300)(60)/(20) E_d = (2)/(3)3 E_d = (2)/(3) × (1)/(3) E_d = (2)/(9) Step 5: Convert the fraction to a decimal and compare with the options. E_d ≈ 0.2222... This value is approximately 0.22. The final answer is B) 0.22. Got more? Send 'em.