Suppose the value of the price elasticity of demand is -3.What does this mean?
A)A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent.
B)A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
C)A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent.
D)A $1 increase in price causes quantity demanded to fall by 3 units.

Question

Quizplus · Accepted Answer

A price elasticity of demand of -3 means that a 1% increase in price will cause a 3% decrease in quantity demanded. This indicates that the good is relatively elastic, meaning that consumers are sensitive to changes in price and will respond by reducing their quantity demanded by a greater percentage than the increase in price.

Suppose the Value of the Price Elasticity of Demand Is