The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to
A) increase by approximately 12 percent.
B) decrease by approximately 12 percent.
C) decrease by approximately 32 percent.
D) decrease by approximately 26 percent.

Question

Quizplus · Accepted Answer

The price elasticity of demand (PED) formula is (Percentage change in Quantity Demanded) / (Percentage change in Price). In this case, we know that PED = 0.60. Therefore we can use the following formula to find the estimated percentage change in quantity demanded for a given percentage change in price: PED = (% Change in Quantity Demanded) / (% Change in Price), which can be rearranged and simplified as follows: % Change in Quantity Demanded = PED x % Change in Price.

Using this formula, we can estimate that a 20 percent increase in the price of beef will cause the quantity of beef demanded to decrease by approximately 12 percent. This calculation shows that beef has a relatively inelastic demand (PED < 1), meaning that a change in price leads to a proportionately smaller change in the quantity demanded.

The Price Elasticity of Demand for Beef Is About 0