Multiple Choice
If price declines from $450 to $350 and,as a result,quantity demanded rises from 1200 to 1500,price elasticity of demand is:
A) 1.78.
B) 0.89.
C) 1.12.
D) 3.42.
The change in quantity is (1500 - 1200) /(1500 + 1200) = 0.011 and the change in price is (350 - 450) /(350 + 450) = 0.125.Thus,elasticity is 0.89,which is inelastic.
Correct Answer:
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