The price of chicken breast rises from $3.50 per pound to $4.25 per pound. In response to this price change, the quantity demanded for chicken breast falls by 30%. What is the absolute value of the price elasticity of demand for chicken breast?
A)0.83
B)-0.83
C)1.4
D)-1.4

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 percentage change in quantity demanded is -30% (since it falls), and the percentage change in price is (4.25 - 3.50) / 3.50 = 0.75 / 3.50 = 0.2143 or 21.43%. The absolute value of the price elasticity of demand is |-30% / 21.43%| = 1.4.

The Price of Chicken Breast Rises from $3