The price of a small chocolate bar increased from 50 pence to 55 pence per bar. The manufacturers found that the demand for their bar decreased by 5%. What is the price elasticity of demand (PED) for the chocolate bar?
Select ONE answer:
- -1
- -2
- -0.5
- -5
- -10
Justify your answer?
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This is multiple choice question is suitable for Economics KS5 classes.
The answer is 3 – Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It is computed as the percentage change in quantity demanded—or supplied—divided by the percentage change in price. i.e. -5% (decrease in quantity demanded) / (55/50 = 10% increase) = -0.5
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