The price elasticity of demand for potatoes is estimated to be -1.3,and the quantity demanded of potatoes is 3,000 bushels per week.In this situation,a 4% rise in the price of potatoes would reduce the quantity demanded by
A) 92 bushels per week.
B) 120 bushels per week.
C) 156 bushels per week.
D) 975 bushels per week.

Question

Quizplus · Accepted Answer

The formula to calculate the change in quantity demanded due to a change in price is:
% Change in Quantity Demanded = Price Elasticity of Demand × % Change in Price
Here, we know that the price elasticity of demand for potatoes is -1.3 and the % change in price is 4%. 
Substituting the values in the formula:
% Change in Quantity Demanded = -1.3 × 4
% Change in Quantity Demanded = -5.2
This means that for a 4% increase in price, the quantity demanded will decrease by 5.2%. To find out the actual quantity, we can use the following formula:
Actual Change in Quantity Demanded = % Change in Quantity Demanded ÷ 100 × Original Quantity Demanded
Substituting the values:
Actual Change in Quantity Demanded = (-5.2 ÷ 100) × 3,000
Actual Change in Quantity Demanded = -156
Therefore, a 4% rise in the price of potatoes would reduce the quantity demanded by 156 bushels per week. 
So, the correct choice is C.

The Price Elasticity of Demand for Potatoes Is Estimated to Be