If the absolute price elasticity of demand is 0.2, a 10 percent increase in the price will cause
A) the quantity demanded to decrease by 2 percent.
B) the quantity demanded to decrease by 20 percent.
C) the quantity demanded to decrease by 5 percent.
D) the quantity demanded to decrease by 0.2 percent.

Question

Quizplus · Accepted Answer

The absolute price elasticity of demand is 0.2, meaning a 1% increase in price leads to a 0.2% decrease in quantity demanded. Therefore, a 10% increase in price results in a 2% decrease in quantity demanded (10% * 0.2 = 2%).

If the Absolute Price Elasticity of Demand Is 0