If price decreases by 10 percent and quantity demanded increases by 30 percent, the price elasticity of demand will be
A) 0.333.
B) 3.
C) 30.
D) 300.

Question

Quizplus · Accepted Answer

The price elasticity of demand can be calculated as: 
% change in quantity demanded / % change in price
In this case, the price decreased by 10%, so the % change in price is -10%. The quantity demanded increased by 30%, so the % change in quantity demanded is 30%. 
Therefore, the price elasticity of demand is:
30% / -10% = -3
But since we are only interested in the absolute value of the elasticity, the answer is 3.

If Price Decreases by 10 Percent and Quantity Demanded Increases