Lyft cuts the price of a ride in New York City by 10%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides?
A)0.4
B)-0.4
C)2.5
D)-2.5

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, it is 25% / 10% = 2.5. The absolute value is 2.5.

Lyft Cuts the Price of a Ride in New York