If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price results in a
A) 0.4 percent decrease in the quantity demanded.
B) 2.5 percent decrease in the quantity demanded.
C) 4 percent decrease in the quantity demanded.
D) 40 percent decrease in the quantity demanded.

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. If the elasticity is 4.0, a 10% increase in price results in a 40% decrease in quantity demanded (4.0 * 10% = 40%).

If the Price Elasticity of Demand for a Good Is