Suppose there is a 3 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded.What is the price elasticity of demand for X
A)0
B)2
C)6
D)infinite

Question

Quizplus · Accepted Answer

The formula for price elasticity of demand is % change in quantity demanded / % change in price. In this case, % change in price is 3% and % change in quantity demanded is -6% (because the quantity decreases by 6% due to the price increase). Therefore, the price elasticity of demand is -6%/3% = -2, but since elasticity is typically reported as a positive number, the answer is 2.

Suppose There Is a 3 Percent Increase in the Price