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- 8 Marks
Question
Due to changes in market conditions, the company finds the demand qq (in thousands) for their kente strips to be 
at a price of GH¢p per kente strip.
Required:
(i) Determine the elasticity of demand when the price is GH¢5 and when the price is GH¢15 per kente strip. (6 marks)
(ii) Comment on your results in (i). (2 marks)
Answer
i)
First, find the derivative of the demand function q = 400 − 
Now calculate the elasticity at the given prices:
When p =
PED = 
When p = 15 we have :
PED = 
(ii) Comment on the results:
When p = 5 the demand is inelastic as the elasticity is less than 1 in absolute value, indicating that a change in price will result in a smaller percentage change in quantity demanded.
When p = 15, the demand is elastic, as the elasticity is greater than 1 in absolute value, indicating that a change in price will result in a larger percentage change in quantity demanded.
- Tags: Demand Function, Elasticity of Demand, Market conditions, Price
- Level: Level 1
- Topic: Elements of Calculus
- Series: NOV 2018
- Uploader: Joseph