A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was
A) elastic.
B) inelastic.
C) of unitary elasticity.
D) indeterminate; more information is needed to determine the price elasticity of demand.

Question

Quizplus · Accepted Answer

The price elasticity of demand is elastic because the percentage change in quantity demanded (33.33%) is greater than the percentage change in price (12.5%).

A Local Krispy Kreme Doughnut Shop Reduced the Price of Its