If the price of a ball point pen falls from N1.00 to N0.60 and the quantity demanded increases. from 200 to…

Analyze the question: We are given a price fall from N1.00 to N0.60 and a quantity rise from 200 to 300. We need the price elasticity of demand.

Concept: Price elasticity of demand (PED) = (% change in quantity demanded) ÷ (% change in price).

The "point" method here uses the original price and quantity as the base:

PED = (ΔQ / Q₁) ÷ (ΔP / P₁)

Solution:

• ΔQ = 300 − 200 = 100
• ΔP = 0.60 − 1.00 = −0.40
• Q₁ = 200 and P₁ = 1.00

% change in quantity = 100/200 = 0.50 (50%)

% change in price = −0.40/1.00 = −0.40 (−40%)

PED = 0.50 / 0.40 = 1.25 (ignoring the negative sign, which only shows that price and quantity move in opposite directions)

Check using the other options:

• Using the midpoint (arc) method: (100/250) ÷ (0.40/0.80) = 0.4/0.5 = 0.80. That is option D, but it is the arc elasticity, not the point elasticity. The question asks for the point elasticity, which uses the original values.

Answer: C. 1.25

Since 1.25 > 1, demand is elastic. The fall in price leads to a proportionally larger rise in quantity demanded.

Exam tip: When a question says "point elasticity," use the original price and quantity as the base. When it says "arc" or "average" elasticity, use the midpoints. Many students lose marks by mixing these up, and options like 0.80 are set as traps.