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. This means the price elasticity of demand for gourmet chocolate bars is
A) elastic.
B) inelastic.
C) undefined.
D) unit elastic.

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% while the price increased by 20%, resulting in an elasticity of 0.75 (15/20), which is less than 1, indicating inelastic demand.

Specialty Chocolate Bars with a High Cocoa Content Have Been