Erdahl Corporation's management believes that every 7% increase in the selling price of one of the company's products leads to a 11% decrease in the product's total unit sales. The product's price elasticity of demand as defined in the text is closest to:
A)-1.72
B)-1.84
C)-1.05
D)-2.05

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is -11% / 7% = -1.57, which is closest to -1.72.

Erdahl Corporation's Management Believes That Every 7% Increase in the Selling