Elasticity, link between demand and supply I have a exercise with the corresponding answer, but i don't get it:


  Suppose there's a better wheather this year and the size of the harvest of soy increased a 60%. The demand curve for soy did not change. The price of the soy dropped a 20%. We can conclude that the elasticity of demand is -3.


Is this true? Under what circumstances? Why? Thank's a lot!
Example

if p = -1%

and the production increase is +2%

elasticity is -2

[2/-1 = -2]

Our exercise

if this is true

when p = -20%

and production is 60% more

elasticity is -3

[60/-20 = -3]

To sell the 60% more the price has to decrease, if it decreases of 20%, the ratio among products sold (+60%) and price decrease (-20%) is equal to -3.

So, elasticity is the ratio among variation in quantity (60%) and variation in price (-20%) = -3.