Suppose a drought increased the price of corn by 25 percent while it decreased the quantity by 50 percent. The price elasticity of demand equals
A) 2.00.
B) 0.50.
C) 20.0.
D) zero.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the quantity decreased by 50% and the price increased by 25%, so the elasticity is -50% / 25% = -2.00.

Suppose a Drought Increased the Price of Corn by 25