Question

Suppose the price of crude oil drops from 150$ a barrel to 120$a barrel. The quantity bought remains unchanged at 100 barrels. The coefficient of price elasticity of demand in this example would be

Answer 1

coefficient = 0

Step-by-step explanation:

We have the formula to calculate the price elasticity of demand as following:

Elasticity coefficient = % Change in quantity/ % Change in price

As given:

+) The percentage change in price is: (120-150)/150= - 20%

+) The quantity bought remains unchanged - which means the percentage change in quantity demanded is 0%

=> Elasticity coefficient = % Change in quantity/ % Change in price

= 0/-20 = 0

So the coefficient of price elasticity of demand in this example would be 0