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CFA Level 1
Economics

Calculating Price Elasticity at Demand Shift

Very Hard Microeconomics Elasticity

In a small, competitive market, the demand for a unique local good is represented by the following equation:

Qd = 100 - 2P

where Qd is the quantity demanded and P is the price of the good. On the supply side, the supply curve is perfectly elastic at a price of $20.

To determine the price elasticity of demand when the price decreases from $30 to $20, what is the price elasticity of demand at the price of $20? Choose the correct answer, keeping in mind that elasticity is calculated using the midpoint formula.

Hint

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