The product's price elasticity of demand as defined in the text is closest to:
A)-1.75
B)-2.22
C)-2.06
D)-1.07

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is (% change in quantity demanded)/(% change in price). Based on the information given in the text, when the price of the product was reduced by 10%, the quantity demanded increased by 20%. Therefore, the price elasticity of demand is equal to (20%)/(-10%) = -2. Hence, the closest option is C)-2.06.

The Product's Price Elasticity of Demand as Defined in the Text