When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold 10 percent more tankfuls.The price elasticity for compressed air is
A)2
B)1/2.
C)1
D)20

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. Here, the percentage change in quantity demanded is +10%, and the percentage change in price is -20%. Thus, the price elasticity of demand is 10% / 20% = 1/2 or 0.5.