The price elasticity of demand for bread is -0.5.If the price falls by 5%,the quantity demanded will change by:

Question

Quizplus · Accepted Answer

Given price elasticity of demand for bread is -0.5, implying that a 1% decrease in price will result in a 0.5% increase in the quantity demanded. 
So, when the price falls by 5%, the quantity demanded will change by 5%*0.5 = 2.5%.
Since the price has fallen, the demand for bread would increase, which means that the answer is a positive percentage change in the quantity demanded. Therefore, the answer is B) +2.5%.

The Price Elasticity of Demand for Bread Is -0