Julia knows the price elasticity of movie rentals is 3.She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately
A)150 percent.
B)100 percent.
C)75 percent.
D)33 percent.

Question

Quizplus · Accepted Answer

The price elasticity of 3 means that for every 1% increase in price, there will be a 3% decrease in rentals. So, a 25% increase in price (from $2 to $2.50) would result in a 75% decrease in rentals (25% multiplied by 3). Thus, the answer is C - 75 percent.

Julia Knows the Price Elasticity of Movie Rentals Is 3