If a 1 percent decrease in the price of breakfast cereals results in a 2 percent increase in the quantity demanded for breakfast cereals, then the price elasticity of the demand for breakfast cereals is
A)2 cents.
B)2 pounds of breakfast cereals.
C)2 percent.
D)$2.
E)2.

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. In this case, we know that a 1 percent decrease in price results in a 2 percent increase in quantity demanded, so the price elasticity of demand is (2%/1%) = 2.

If a 1 Percent Decrease in the Price of Breakfast