If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3.

Question

Quizplus · Accepted Answer

Price elasticity of demand (PED) measures the responsiveness of quantity demanded to changes in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.

In this scenario, the price increases by 15% and the quantity demanded falls by 45%. Using the formula for PED, we get:

PED = (% change in quantity demanded) / (% change in price)
PED = (-45%) / (15%) = -3

Since the PED is negative, we take the absolute value to get a positive value of 3. This means that the quantity demanded is highly responsive to changes in price, indicating that the product is highly elastic. Therefore, A is the correct answer.

If the Price of Calculators Increases by 15 Percent and the Quantity