Edexcel Economics Paper 1 2017 Q2 (See full question below)

Q: Between 2010 and 2015 the average price of tea in the UK increased from £7.20 per kilo to £8.48 per kilo. Over the same period the quantity of tea purchased fell from 97 million kilos to 76 million kilos. Assume that the change in the quantity of tea purchased was only caused by the change in the price of tea. Calculate the price elasticity of demand for tea in response to the rise in its price. You are advised to show your working.A: Price Elasticity of Demand = (% change in quantity)/(% change in price) = (76/97 -1) / (8.48/7.2 -1) = -21.65%/-17.78% = -1.2One mark is available for applying the correct formula. On mark is available for the correct final number. Remember the intuition for this is crucial. This tells us that for every unit increase price, there is a 1.2 unit fall in demand for tea. This is indicated by the negative sign.