If a 12 percent fall in price results in an 8 percent increase in quantity demanded,the price elasticity of demand equals
A)0.96.
B)0.12.
C)0.67.
D)1.5.
E)0.8.

Question

Quizplus · Accepted Answer

Price elasticity of demand = percentage change in quantity demanded / percentage change in price
Here, we are given that when the price falls by 12%, the quantity demanded increases by 8%. Therefore, the percentage change in quantity demanded is 8% and the percentage change in price is -12%. 
Plugging these values in the formula, we get:
Price elasticity of demand = 8% / (-12%) = -0.67
However, we need a positive value for price elasticity of demand. So, taking the absolute value of -0.67, we get 0.67. Therefore, the price elasticity of demand equals 0.67.

If a 12 Percent Fall in Price Results in an 8