Because of declining stocks in the Caspian Sea, Beluga caviar prices recently increased by a whopping 25% (to about $700 per ounce). As a result, purchases of Beluga caviar decreased by 5%. The price elasticity of demand for Beluga caviar is:
A)5.
B)2.
C)0.2.
D)0.5.

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 -5% / 25% = -0.2.

Because of Declining Stocks in the Caspian Sea, Beluga Caviar