If a 5 per cent decrease in the price of a good produces a 5 per cent increase in the quantity demanded, the price elasticity of demand is:
A) perfectly elastic.
B) perfectly inelastic.
C) elastic.
D) unitary elastic.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, a 5% decrease in price leads to a 5% increase in quantity demanded, giving an elasticity of 1 (5%/5%), which is defined as unitary elastic.

If a 5 Per Cent Decrease in the Price of a Good