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20 July, 13:11

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

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  1. 20 July, 16:18
    0
    coefficient = 0

    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
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