Susan's price elasticity of restaurant meals is 2.27. If the price of a restaurant meal falls by 2 percent, the quantity of restaurant meals Susan demands will:
A) increase by 2.27 percent.
B) fall by 2.27 percent.
C) increase by 4.54 percent.
D) increase by 22.7 percent.

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of 2.27, a 2% decrease in price will lead to a 4.54% increase in quantity demanded (2.27 * 2% = 4.54%).

Susan's Price Elasticity of Restaurant Meals Is 2