If the price of hairbrushes decreases by 20 percent and the quantity of hairbrushes demanded increases by 2 percent, the price elasticity of demand is _____ and is _____.
A) −0.1; elastic
B) 10; elastic
C) −0.1; inelastic
D) 10; inelastic

Question

Quizplus · Accepted Answer

To calculate the price elasticity of demand, we use the formula:

Price Elasticity of Demand = (% change in quantity demanded) / (% change in price)

Given: 
% change in price = -20%
% change in quantity demanded = 2%

Price Elasticity of Demand = (2%)/(-20%) = -0.1

Since the absolute value of the price elasticity of demand is less than 1, demand for hairbrushes is inelastic. Therefore, the correct choice is C.

If the Price of Hairbrushes Decreases by 20 Percent and the Quantity