A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of Miami.The elasticity of demand for rice is
A)greater in Miami than in Gainesville, even taking into account the population difference.
B)greater in Gainesville than in Miami in spite of the population difference.
C)equal in Gainesville and Miami regardless of the population difference.
D)impossible to compare because of the population difference.

Question

Quizplus · Accepted Answer

The percentage change in quantity demanded is the same in both cities (25%), and the percentage change in price is also the same (20%). Therefore, the elasticity of demand, which is the percentage change in quantity demanded divided by the percentage change in price, is equal in both cities regardless of the population difference.

A Decrease in the Price of Rice from 50 Cents