Answer:
INELASTIC i.e < 1 . Elasticity of Demand = 0.2
Explanation:
Demand Elasticity reflects magnitude of change in demand quantity due to change in price.
ELASTICITY FORMULA : % change in quantity / % change in price
= (ΔQ/ΔP)X P/Q
Elastic Demand : Elasticity > 1 , %change quantity > percentage change price
Inelastic Demand : Elasticity < 1 , % change quantity < % change price .
In this case : P = 1 , Q = 100 , P' = 2 , Q' = 80 , ΔP = 1 , ΔQ = -20 ; Elasticity :-
(ΔQ/ΔP)X P/Q = (20/1) x (1/100) = 20 x 0.01 = 0.2 i.e < 1 [Inelastic Demand]
%change quantity 100% (1/2 x 100) > %change in price 20% (20/100 x 100)
100 / 20 = 0.2 i.e < 1 [Inelastic Demand]
