- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics (1)
- Reading 12. Topics in Demand and Supply Analysis
- Subject 2. Elasticities of Demand
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 |
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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. |