If the price elasticity of demand for a product is equal to 0.5,then a 10 percent decrease in price will:
A) increase quantity demanded by 5 percent.
B) increase quantity demanded by 0.5 percent.
C) decrease quantity demanded by 5 percent.
D) decrease quantity demanded by 0.5 percent.
The numerator in the elasticity equation is increased by 5 percent and the denominator has decreased 10 percent,so the elasticity coefficient is (5/10)= 0.5.

Question

Quizplus · Accepted Answer

A 0.5 price elasticity of demand means that a 10 percent decrease in price will lead to a 5 percent increase in quantity demanded (0.5 x 10 = 5). Therefore, choice A is the correct answer as it reflects this relationship.

If the Price Elasticity of Demand for a Product Is