If the price elasticity of demand is 0.5,then a 10% increase in price results in a
A)50% reduction in quantity demanded.
B)5% increase in quantity demanded.
C)5% decrease in total revenues.
D)5% decrease in quantity demanded.
E)0.5% decrease in quantity demanded.

Question

Quizplus · Accepted Answer

A price elasticity of demand of 0.5 means that for every 1% increase in price, quantity demanded will decrease by only 0.5%. Therefore, a 10% increase in price will result in a 5% decrease in quantity demanded (10% x 0.5 = 5%).

If the Price Elasticity of Demand Is 0