"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." Calculate Jennika's price elasticity of demand for pork if she decreases her consumption by 4 percent.
A) 1.25
B) 1
C) 0.75
D) 0.66

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the price of pork increases by 3%, and Jennika decreases her consumption by 4%. Thus, elasticity = -4% / 3% = -1.33. The closest positive value is 1.25, indicating Jennika's demand is elastic.

"The Department of Agriculture Came Out Today with Its Prediction