CFA Practice Question

There are 923 practice questions for this topic.

CFA Practice Question

The price decreases from $2,000 to $1,800. Quantity demanded per year increases from 5000 to 6000 units. Which of the following is correct?
A. The price elasticity of demand is -2.
B. Income elasticity is + 0.5.
C. The good is inferior.
Explanation: The percentage change in demand is +20%; the percentage change in price is -10%, so the price elasticity of demand is -2.

User Contributed Comments 1

User Comment
romankuzyk Should we not be using Arc Elasticity in this case? There was almost the same question here before, but the answer was given using the arc elasticity there.
You need to log in first to add your comment.