When the price of tacos rise 4 percent,the quantity demanded decreases 10 percent.What is the price elasticity of demand for tacos?
A) 40.0
B) 25.0
C) 0.4
D) 2.5
E) 10.0

Question

Quizplus · Accepted Answer

The price elasticity of demand (PED) is calculated as the percentage change in quantity demanded divided by the percentage change in price. 
Given the price increase of 4% and the decrease in quantity demanded of 10%, we can calculate the PED as: 
PED = (% change in quantity demanded) / (% change in price) 
PED = -10 / 4 
PED = -2.5 (note that we use a negative sign because price and quantity demanded have an inverse relationship) 
Therefore, the absolute value of PED is 2.5, which means that the demand for tacos is relatively elastic.

When the Price of Tacos Rise 4 Percent,the Quantity Demanded