If Alden raises the price on the handheld mixer by 2 percent and quantity demanded falls by 10 percent,what is the price elasticity of demand?
A)- 12
B)5
C)12
D)- 8
E)- 5

Question

Quizplus · Accepted Answer

Price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. Mathematically, it is calculated as the percentage change in quantity demanded divided by the percentage change in price.

In this case, we know that price increased by 2 percent and quantity demanded fell by 10 percent. The price elasticity of demand can be calculated as follows:

Price elasticity of demand = (% change in quantity demanded) / (% change in price)
Price elasticity of demand = (-10%) / (2%)
Price elasticity of demand = -5

Since the elasticity value is negative, we know that handheld mixer is an inelastic good. This means that the percentage change in quantity demanded is less than the percentage change in price. In other words, consumers are not very responsive to changes in price, indicating that the handheld mixer is a necessity rather than a luxury good.

If Alden Raises the Price on the Handheld Mixer by 2