If the price elasticity of demand is 0.4,a 5 percent increase in price will quantity demanded to fall by 2 percent.

Question

Quizplus · Accepted Answer

This statement accurately describes the relationship between price elasticity and the percentage change in quantity demanded. A price elasticity of demand of 0.4 indicates that the quantity demanded is relatively inelastic, meaning that a change in price will have a relatively small effect on the change in quantity demanded. Specifically, a 5 percent increase in price will result in a 2 percent decrease in quantity demanded, which is consistent with a price elasticity of 0.4.

If the Price Elasticity of Demand Is 0