As the price for some product increases from $4.00 to $5.00 per unit,quantity demanded decreases from 400 to 300 units per month.For this segment of the demand curve,the price elasticity of demand is
A)7.
B)9.
C)7/9.
D)1.
E)9/7.

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. The percentage change in quantity is (300-400)/400 = -0.25, and the percentage change in price is (5-4)/4 = 0.25. The elasticity is -0.25/0.25 = -1, but since we are looking for the absolute value, it is 1. However, the choices given seem to be incorrect for the standard calculation, but based on the given options, E) 9/7 is the closest to the correct calculation if considering the absolute value of elasticity.

As the Price for Some Product Increases from $4