Suppose a rise in the price of peaches from $5.50 to $6.50 per kilogram decreases the quantity demanded from 12,500 to 11,500 kilograms. The price elasticity of demand is
A) 1000.0.
B) 2.0.
C) 1.0.
D) 0.5.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). The percentage change in quantity demanded is ((11,500 - 12,500) / 12,500) = -0.08, and the percentage change in price is ((6.50 - 5.50) / 5.50) = 0.1818. Thus, the elasticity is -0.08 / 0.1818 = -0.44, which rounds to 0.5 in absolute value.

Suppose a Rise in the Price of Peaches from $5