If a 2 percent decrease in the price of a good leads to a 6 percent increase in the quantity demanded, the price elasticity of demand for the good equals ________.
A)2.0
B)3.0
C)6.0
D)0.33

Question

Quizplus · Accepted Answer

The formula for price elasticity of demand is:
% change in quantity demanded / % change in price

Using the information given in the question, we can calculate the price elasticity of demand as follows:

% change in quantity demanded = 6%
% change in price = -2% (since the price decreased)

Price elasticity of demand = 6% / -2% = -3

Note that the negative sign indicates that the demand is elastic (i.e., responsive to changes in price). To make the answer positive, we can take the absolute value, which gives us 3. Therefore, the price elasticity of demand for the good is 3, which corresponds to choice (B).

If a 2 Percent Decrease in the Price of a Good