If a 10 percent rise in the price of bananas leads to a 20 percent reduction in the quantity of bananas demanded,then the price elasticity of demand is 2.00.

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.

In this case, we have:

Price elasticity of demand = (20% reduction in quantity demanded) / (10% rise in price)

Price elasticity of demand = 2

Therefore, the statement is true.

If a 10 Percent Rise in the Price of Bananas