Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is
A) 2.5.
B) 0.4.
C) 0.5.
D) 5.
E) inelastic.

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is 25% / 10% = 2.5.

Suppose the Pleasant Corporation Cuts the Price of Its American