A Firm Is Observed Using 15 Units of Input X

question 101

Multiple Choice

A firm is observed using 15 units of input X when the price of X is $2,and 10 units of X when its price increases to $4.What is the elasticity of demand for input X in this price range?

• A) 0.5
• B) 0.6
• C) 1.67
• D) 2.0
• Elasticity of resource demand is the absolute value of the change in quantity of workers divided by the change in resource price.In this case,elasticity is |[(10 - 15)/(10 + 15)]/[(4 - 2)/(4 + 2)]| = 0.6.

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