If the price elasticity of demand for pineapples is 0.75, then a 4 percent increase in the price of pineapples will lead to a:
A)3 percent decrease in the quantity of pineapples demanded.
B)3 percent increase in the quantity of pineapples demanded.
C)0.75 percent decrease in the quantity of pineapples demanded.
D)0.75 percent increase in the quantity of pineapples demanded.

Question

If the price elasticity of demand for pineapples is 0.75, then a 4 percent increase in the price of pineapples will lead to a:
A)3 percent decrease in the quantity of pineapples demanded.
B)3 percent increase in the quantity of pineapples demanded.
C)0.75 percent decrease in the quantity of pineapples demanded.
D)0.75 percent increase in the quantity of pineapples demanded.

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 0.75 and price increases by 4 percent, then quantity demanded must fall by 3 (= 0.75 × 4)percent. Recall that price and quantity demanded move in opposite directions.

If the Price Elasticity of Demand for Pineapples Is 0