Multiple choice

Yesterday, price of petrol was Rs. 20 per litre and Vishal was willing to purchase 10 litres for his bike.Today, price of petrol has gone up to Rs. 25 and now Vishal is willing to purchase 8 litres. What is Vishal's elasticity of demand?

  1. Inelastic

  2. Unitary elastic

  3. Perfectly inelastic

  4. Perfectly elastic demand

  5. Diminishing marginal utility
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

% change in quantity demanded = (8 - 10)/10 = -0.20 = -20% % change in price = (25-20)/20 = 0.25 = 25% Elasticity = |( -20%)/(25% )| = |-0.8| = 0.8  

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