Which one of the following situations gives a price elasticity of demand of 5.0? A 10 percent rise in price is accompanied by a
A)2 percent increase in quantity demanded.
B)5 percent decrease in quantity demanded.
C)2 percent decrease in quantity demanded.
D)50 percent decrease in quantity demanded.
E)50 percent increase in quantity demanded.

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. A 50% decrease in quantity demanded as a result of a 10% increase in price gives an elasticity of -50%/10% = -5.0 (ignoring the negative sign as elasticity is often considered in absolute terms).

Which One of the Following Situations Gives a Price Elasticity