When the price of a product is increased 8 percent, the quantity demanded decreases 20 percent. The price-elasticity of demand coefficient for this product is
A)2.5.
B)25.
C)0.4.
D)4.

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, it is -20% / 8% = -2.5. The negative sign indicates the inverse relationship between price and quantity demanded.

When the Price of a Product Is Increased 8 Percent