The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%.The price elasticity of demand is equal to _____,and demand is described as _____.
A)0.2;inelastic
B)5;inelastic
C)0.2;elastic
D)5;elastic

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, which is -1%/5% = -0.2. The negative sign is often ignored when discussing elasticity, so we say the elasticity is 0.2. Because the absolute value of the elasticity is less than 1, demand is described as inelastic.

The Price of Gasoline Rises 5% and the Quantity of Gasoline