CFA Practice Question

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CFA Practice Question

Measuring the price of gasoline in dollars, an economist calculates the price elasticity of demand to be 0.5. What would the price elasticity of demand be if the economist had chosen to measure the price of gasoline in pennies rather than dollars?

A. 0.5
B. 0.05
C. 0.005

Correct Answer: A

Elasticity is independent of units.

User Contributed Comments 8

User Comment
airborne that was a good one
Chimuriwo Yeah, it is a good one mate!
odette I was beaten to divide 0.5 by 100
thekobe no matter what is the unit, remember change in P/change in q
yraz Got me, lol
cfastudypl GOOD ONE AN!
Huricane74 @theKobe: Price Elasticity of Demand is:
Price Elasticity = (Percentage in Quantity) / (Percent Change in Price)
jmliguori Good? I think that is a waste of a question. I can't imagine something like that on the test.
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