If the price of a bicycle changes from N120 to N80 and quantity bought changes from 300 to 500 units; the elasticity of demand for bicycle is?

A. 66.7
B. 0.5
C. 1.5
D. 2.0

Correct Answer:

Option D – 2.0

Explanation

change in price = 120- 80 = 40

change in quantity = 500 – 300 = 200

% change = 40/100 = 0.4

200/100 = 2

0.4/2 = 0.2