Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is:
A) 2.5.
B) 0.4.
C) 0.5.
D) 5.0.

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is 25% / 10% = 2.5.

Suppose the Pleasant Corporation Cuts the Price of Its American