Studio clothing store knows that the price elasticity of demand for its jeans is 2.5.If the price of jeans were to increase by 10%:
A)quantity demanded of jeans would rise by 25%.
B)quantity demanded of jeans would fall by 25%.
C)quantity demanded of jeans would rise by 4%.
D)quantity demanded of jeans would fall by 4%.

Question

Quizplus · Accepted Answer

The price elasticity of demand is 2.5, which means that for every 1% increase in price, the quantity demanded decreases by 2.5%. Therefore, a 10% increase in price would lead to a 25% decrease in quantity demanded (10% * 2.5 = 25%).

Studio Clothing Store Knows That the Price Elasticity of Demand