If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1 percent, quantity demanded would:
A)increase by 0.33 percent.
B)decrease by 0.33 percent.
C)increase by 3 percent.
D)decrease by 3 percent.

Question

Quizplus · Accepted Answer

The price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price, so if the price elasticity of demand is 3 and price increases by 1 percent, then quantity demanded must fall by 3 percent (when price increases, quantity demanded falls).

If the Absolute Value of the Price Elasticity of Demand