Suppose that when the price of water rises by 30 percent, the quantity demanded falls by 10 percent. The price elasticity of demand for water is ____________, making water an _______________ good (in this example).
A)0.33; inelastic
B)3.0; elastic
C)1.0; unit elastic
D)0.33; elastic

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price, which in this case is -10%/30% = -0.33. Since the absolute value is less than 1, water is considered an inelastic good.

Suppose That When the Price of Water Rises by 30