If the price elasticity is 1.50 for the demand of vanilla lattes, then if the seller raises price by 10 percent, then quantity demanded for the product will
A)rise by 15 percent.
B)fall by 15 percent.
C)fall by 1.5 percent.
D)fall by 67 percent.

Question

Quizplus · Accepted Answer

A price elasticity of 1.50 means that a 10 percent increase in price will result in a 15 percent decrease in quantity demanded (1.50 x 10 = 15). Therefore, the quantity demanded for vanilla lattes will fall by 15 percent.

If the Price Elasticity Is 1