If the price elasticity of demand for purebred Siamese kittens is 2.0, then a 4 percent decrease in the price of Siamese kittens will result in a ___ percent increase in quantity demanded.
A) 4
B) 2
C) 8
D) 16

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is % Change in Quantity Demanded / % Change in Price. Given an elasticity of 2.0 and a 4% decrease in price, the calculation is 2.0 = % Change in Quantity Demanded / -4%. Solving for % Change in Quantity Demanded gives an 8% increase.

If the Price Elasticity of Demand for Purebred Siamese Kittens