In the article "Colombia,Brazil Advance Proposal to Withhold 10 Percent of Export Output" (The Wall Street Journal,September 23,1991,p.B6),a Colombian delegate to the International Coffee Organization said that if all its members withheld 10% of export output,the international price would rise 20%.This statement implies that the price elasticity of demand for coffee is approximately:
A) -0.00.
B) -5.00.
C) -2.00.
D) -0.20.
E) -0.50.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, a 10% decrease in quantity supplied leads to a 20% increase in price, implying an elasticity of -0.50 (since -10%/20% = -0.50).

In the Article "Colombia,Brazil Advance Proposal to Withhold 10 Percent