If 20 percent increase in the price of a good leads to a 60 percent decrease in the quantity demanded, then what is the price elasticity of demand?
A)30.
B)3.
C)1/3.
D)1/6.

Question

If 20 percent increase in the price of a good leads to a 60 percent decrease in the quantity demanded, then what is the price elasticity of demand?
A)30.
B)3.
C)1/3.
D)1/6.

Quizplus · Accepted Answer

The price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price, here -60/20 = -3. By convention, the price elasticity of demand is expressed in terms of its absolute value.

If 20 Percent Increase in the Price of a Good Leads