If a 10 percent increase in the price of a good causes a 10 percent decrease in the quantity demanded of the good,the good has an elasticity of demand equal to ________.
A) zero
B) infinity
C) one
D) two

Question

Quizplus · Accepted Answer

The formula for elasticity of demand is % change in quantity demanded / % change in price. In this case, there is a 10% decrease in quantity demanded and a 10% increase in price, which means the elasticity of demand is (-10%/10%) = -1 or -1/1 = -1. Since elasticity is a positive number, we take the absolute value, which gives us an elasticity of demand equal to 1, meaning the good has unitary elasticity.

If a 10 Percent Increase in the Price of a Good