When the price of a car is $25,000,car sales are 10,000 per month.When the price of a car increases to $29,000,car sales fall to 8,000 per month.Therefore,using initial value,a 1% increase in the price of the car will result in a ________ in the quantity demanded of cars.

Question

Quizplus · Accepted Answer

To calculate the percentage change in quantity demanded, use the following formula:

% Change in Quantity Demanded = ((New Quantity Demanded - Original Quantity Demanded) / Original Quantity Demanded) * 100%

Using the given information:

Original Quantity Demanded = 10,000
New Quantity Demanded = 8,000

% Change in Quantity Demanded = ((8,000 - 10,000) / 10,000) * 100% = -20%

This means that a 1% increase in the price of the car will result in a 20% decrease in the quantity demanded of cars.

To find the specific percentage for a 1% increase:

20% / 100 = 0.2

0.2 x 1 = 0.2

Thus, a 1% increase in price will result in a 0.2% decrease in quantity demanded.

Therefore, the answer is B, a 1.25% decrease is not a choice.

When the Price of a Car Is $25,000,car Sales Are