The price of chicken breast rises from $3.30 per pound to $3.63 per pound. In response to this price change, the quantity demanded for chicken breast falls by 40%. The absolute value of the price elasticity of demand for chicken breast is _____, and the price elasticity of demand is _____.
A)0.25; elastic
B)0.25; inelastic
C)4; elastic
D)4; inelastic

Question

Quizplus · Accepted Answer

The absolute value of the price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the price increases from $3.30 to $3.63, which is a 10% increase (($3.63-$3.30)/$3.30). The quantity demanded decreases by 40%. Therefore, the price elasticity of demand is 40%/10% = 4, indicating a highly responsive demand to price changes, thus classified as elastic.

The Price of Chicken Breast Rises from $3