A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -0.1. The government must ________ the price of electricity by ________.
A) raise; 100.0%
B) raise; 10.0%
C) raise; 1.0%
D) lower; 20%

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is percentage change in quantity demanded divided by percentage change in price. To achieve a 10% reduction in quantity demanded with a price elasticity of -0.1, the price must be raised by 100% (10% / -0.1 = -100%).

A Government Wants to Reduce Electricity Consumption by 10