The price elasticity of demand for DVDs is 2. If the price of a DVD increased by 2 percent, the quantity demanded will
A) decrease by 2 percent.
B) not change.
C) decrease by 4 percent.
D) decrease by 1 percent.

Question

Quizplus · Accepted Answer

Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. An elasticity of 2 means that for every 1% increase in price, the quantity demanded decreases by 2%. Therefore, a 2% increase in price will lead to a 4% decrease in quantity demanded.

The Price Elasticity of Demand for DVDs Is 2