If the absolute value of the price elasticity of demand for gasoline is 0.5, then a 10 percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity demanded.

Question

Quizplus · Accepted Answer

The absolute value of the price elasticity of demand of 0.5 means that a 10 percent increase in price would lead to a 5 percent decrease in the quantity demanded, not 0.5 percent.

If the Absolute Value of the Price Elasticity of Demand