A product's price elasticity (expressed as a positive number) is 2.7. If there is a 10 percent increase in price, the quantity demanded will
A) increase by 2.7 percent.
B) increase by 27 percent.
C) decrease by 2.7 percent.
D) decrease by 27 percent.

Question

Quizplus · Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. A price elasticity of 2.7 means that for every 1% increase in price, the quantity demanded will decrease by 2.7%. Therefore, a 10% increase in price will lead to a 27% decrease in quantity demanded.

A Product's Price Elasticity (Expressed as a Positive Number) Is