Suppose that the quantity demanded of good X rises by 8 percent when the price of good X falls by 2 percent. This information indicates that the price elasticity of demand equals
A)4.
B)2.50.
C)0.25.
D)10.
E)There is not enough information provided to answer this question.

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. In this case, the quantity demanded rises by 8 percent when the price falls by 2 percent, so the price elasticity of demand is 8% / 2% = 4.

Suppose That the Quantity Demanded of Good X Rises by 8