If quantity demanded rises by 10 percent as price falls by 9 percent,the price elasticity of demand equals
A) 0.90.
B) 1.11.
C) 0.09.
D) 0.19.

Question

Quizplus · Accepted Answer

Price Elasticity of Demand (PED) = (Percentage change in quantity demanded) / (Percentage change in Price)
In this scenario, percentage change in quantity demanded = 10% and percentage change in price = -9%
PED = (10%)/(-9%) = -1.11
Since PED is negative (due to an inverse relationship between price and quantity demanded), we take the absolute value to get 1.11. Therefore, the answer is B.

If Quantity Demanded Rises by 10 Percent as Price Falls