Assume that demand decreases by 3 percent, the absolute value of price elasticity of demand is 1.0, and price elasticity of supply is 1.0. What is the percentage price change in this case?
A) -1.5
B) -0.5
C) 0.5
D) 1.5

Question

Quizplus · Accepted Answer

When demand decreases by 3% and both the price elasticity of demand and supply are 1.0, the price will decrease by 1.5% to restore equilibrium.

Assume That Demand Decreases by 3 Percent, the Absolute Value