A value of the absolute price elasticity of demand equal to 0.5 indicates that
A) a 0.5% decrease in price leads to a 1% increase in quantity demanded.
B) a 2% decrease in price leads to a 25% increase in quantity demanded.
C) a 1% increase in price leads to a 5% decrease in quantity demanded.
D) a 10% increase in price leads to a 5% decrease in quantity demanded.

Question

Quizplus · Accepted Answer

The absolute price elasticity of demand measures the percentage change in quantity demanded resulting from a percentage change in price. A value of 0.5 means that for every 1% change in price, the quantity demanded changes by 0.5%. Therefore, a 10% increase in price leads to a 5% decrease in quantity demanded.

A Value of the Absolute Price Elasticity of Demand Equal