The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the
A) quantity of oil demanded will result from a 0.5 percent increase in the price of oil.
B) quantity of oil demanded will result from a 0.5 percent decrease in the price of oil.
C) price of oil will increase the quantity of oil demanded by 0.5 percent.
D) price of oil will decrease the quantity of oil demanded by 0.5 percent.

Question

Quizplus · Accepted Answer

Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. A value of 0.05 indicates that a 10% increase in price will lead to a 0.5% decrease in quantity demanded.

The Price Elasticity of Demand for Oil Is Estimated at 0.05