A grocery store announced a 50% decrease in the price of local honey. Sales increased by 200%. Based on the information, the price elasticity of honey is
A) 0.25.
B) 0.04.
C) 0.4.
D) 4.

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. Here, the quantity demanded increased by 200% and the price decreased by 50%. So, the price elasticity of demand = (200% / 50%) = 4.

A Grocery Store Announced a 50% Decrease in the Price