If sales of apples decrease by 5% because of an increase in the price of apples by 10%, the elasticity of demand for apples is
A) 0.
B) 0.5.
C) 1.
D) 2.

Question

Quizplus · Accepted Answer

The elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is (-5% / 10%) = -0.5. The negative sign indicates the inverse relationship between price and demand, but elasticity is often reported in absolute terms, making the answer 0.5.

If Sales of Apples Decrease by 5% Because of an Increase