If the price of electronic readers falls 6 percent and quantity demanded rises by 9 percent, the elasticity of demand is ______ in absolute value, so demand is ______.
A) 3.0, elastic
B) 15; inelastic
C) 0.67; inelastic
D) 1.5; elastic

Question

Quizplus · Accepted Answer

The formula for price elasticity of demand is:
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

Using the given information, we can calculate the elasticity of demand as follows:

% Change in Quantity Demanded = 9%
% Change in Price = -6% (since the price falls)

Price Elasticity of Demand = 9% / (-6%) = -1.5

Since the elasticity of demand is greater than 1 in absolute value, demand is considered to be elastic. Therefore, if the price falls 6%, the quantity demanded will increase by a relatively larger amount (9%), resulting in a total increase in revenue.

If the Price of Electronic Readers Falls 6 Percent and Quantity