If the price elasticity of demand for a good is 0.25,then a 20 percent decrease in price results in a
A) 0.0125 percent increase in the quantity demanded.
B) 4 percent increase in the quantity demanded.
C) 5 percent increase in the quantity demanded.
D) 80 percent increase in the quantity demanded.

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of 0.25, a 20% decrease in price results in a 5% increase in quantity demanded (0.25 * 20% = 5%).

If the Price Elasticity of Demand for a Good Is