If the price elasticity of demand is 2 in absolute value, then when the price of Good X rises by 25 percent:
A) the quantity demanded of Good X rises by 50 percent.
B) the quantity demanded of Good X falls by 50 percent.
C) the quantity demanded of Good X rises by 12.5 percent.
D) the quantity demanded of Good X falls by 12.5 percent.

Question

Quizplus · Accepted Answer

Price elasticity of demand of 2 means that for every 1% increase in price, the quantity demanded decreases by 2%. Therefore, a 25% increase in price leads to a 50% decrease in quantity demanded.

If the Price Elasticity of Demand Is 2 in Absolute