If the price elasticity of demand for smart watches is 1.4 (dropping the minus sign), then a 50 percent increase in the price of smart watches will lead to
A)the sale of 200 additional smart watches.
B)the sale of 125 percent fewer smart watches than before.
C)the sale of 70 percent fewer smart watches than before.
D)the sale of 25 percent fewer smart watches than before.

Question

Quizplus · Accepted Answer

A price elasticity of demand of 1.4 means that a 1% increase in price results in a 1.4% decrease in quantity demanded. Thus, a 50% increase in price will lead to a 70% decrease in quantity demanded (50% x 1.4 = 70%). Therefore, choice C is the correct answer.

If the Price Elasticity of Demand for Smart Watches Is