Specialty chocolate bars with a high cocoa content have been drawing a lot of attention in gourmet circles in 2008 but the price of cocoa beans has increased more than 44 percent in this time period. In response to the increase in the price of cocoa beans, Rogue Chocolatier has increased the price of their gourmet chocolate bars by 20 percent. Rogue observes the quantity of their bars sold decreased by 15 percent. Based on this news clip, what does the price elasticity of demand for gourmet chocolate bars equal?
A) 0.75
B) 1.25
C) 1
D) 0.66

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 demanded decreased by 15% and the price increased by 20%, so the elasticity is -15% / 20% = -0.75.

Specialty Chocolate Bars with a High Cocoa Content Have Been