You are the owner of a boutique clothing store and estimate the price elasticity of demand for your clothing to be 2.50 and the income elasticity of demand for your clothing to be 1.55. If you increase the price of your clothing by 10 percent, which of the following should you expect to occur?
A)The quantity demanded of your clothing will increase by 25 percent.
B)The quantity demanded of your clothing will increase by 15.5 percent.
C)The quantity demanded of your clothing will decrease by 15.5 percent.
D)The quantity demanded of your clothing will decrease by 25 percent.

Question

Quizplus · Accepted Answer

The price elasticity of demand is 2.50, meaning if the price increases by 10 percent, the quantity demanded will decrease by 2.50 times 10 percent, which is 25 percent.

You Are the Owner of a Boutique Clothing Store and Estimate