The price elasticity of demand for tomatoes is 1.2 during the summer.If a drought causes the price of tomatoes to increase 15%,farmers can expect quantity demanded to
A) decrease by 18%.
B) increase by 18%.
C) decrease by 12.5%.
D) increase by 12.5%.

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is % change in quantity demanded / % change in price. Given an elasticity of 1.2 and a price increase of 15%, the expected change in quantity demanded is -18% (1.2 * 15%).

The Price Elasticity of Demand for Tomatoes Is 1