When the price of a pack of Crispo potato wafers was increased from $4 to $5, the quantity demanded by local retail stores went down by 50%. Hence, the price elasticity of demand for Crispo is ________.
A) -2
B) 2
C) 4
D) -4
E) 0.5

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. Here, the quantity demanded decreased by 50% and the price increased by 25% (from $4 to $5). Thus, the elasticity is -50% / 25% = -2.

When the Price of a Pack of Crispo Potato Wafers