If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then according to the averaging equation, the value of price elasticity of demand in absolute terms is:
A) 0.33.
B) 2.33.
C) 0.25.
D) 3.
E) 0.66.

Question

Quizplus · Accepted Answer

Price elasticity of demand = (% change in quantity demanded) / (% change in price)= (80-100)/100 / (2-1)/1 = -20/100 / 1 = -0.2 = 0.2

If an Increase in the Price of a Product from $1