An Internet company wants to increase the consumption of Internet packages by 15%.The price elasticity of demand for Internet packages is 2.The telephone company should
A) lower the price of Internet packages by 30.0%.
B) lower the price of Internet packages by 7.5%.
C) lower the price of Internet packages by 3.0%.
D) raise the price of Internet packages by 0.1%.

Question

Quizplus · Accepted Answer

Since the price elasticity of demand is 2, a 1% decrease in price will result in a 2% increase in demand. The company wants to increase the consumption of Internet packages by 15%, so we need to decrease the price accordingly.

Let x be the percentage decrease in price, then:

2x = 15
x = 7.5

Therefore, the company should lower the price of Internet packages by 7.5%.

An Internet Company Wants to Increase the Consumption of Internet