Jack owns a pumpkin patch and has been selling pumpkins for $10. As Halloween approaches, he worries about having too many unsold pumpkins, so he lowers the price by 20%. If the price elasticity of demand for pumpkins is 1.5, how many more pumpkins will Jack sell?
A) 10% more
B) 13.3% more
C) 25% more
D) 30% more

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is: % change in quantity demanded = elasticity * % change in price. Here, elasticity is 1.5 and the price change is -20%, so the quantity change is 1.5 * (-20%) = 30% increase in quantity demanded.

Jack Owns a Pumpkin Patch and Has Been Selling Pumpkins