If a 1 percent decrease in the price of steak results in a 2 percent increase in the quantity demanded for steak,then the price elasticity of the demand for steak is
A)2 cents.
B)2 pounds of steak.
C)2 percent.
D)$2.
E)2.

Question

Quizplus · Accepted Answer

The price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price. The formula for price elasticity of demand is:
Price elasticity = percentage change in quantity demanded / percentage change in price
Given that a 1% decrease in price leads to a 2% increase in quantity demanded:
Percentage change in quantity demanded = 2%
Percentage change in price = -1%
Substituting these values in the formula:
Price elasticity = 2% / (-1%) = -2
Note that price elasticity is usually expressed as an absolute value, so the answer is 2.

If a 1 Percent Decrease in the Price of Steak