If the price elasticity of demand for Good A is -0.2 and the price increases from $2.25 to $2.75,the percentage change in the quantity demanded of Good A is
A)-100 percent.
B) 100 percent.
C) 4.0 percent
D) -4.0 percent.
E) unknown because not enough information is provided.

Question

Quizplus · Accepted Answer

The percentage change in quantity demanded is equal to the price elasticity of demand multiplied by the percentage change in price. In this case, the price elasticity of demand is -0.2 and the percentage change in price is (2.75 - 2.25) / 2.25 = 0.222. Therefore, the percentage change in quantity demanded is -0.2 * 0.222 = -0.0444, or -4.44%.

If the Price Elasticity of Demand for Good a Is