If the price of a DVD decreases by 50 percent,the quantity demanded increases by 75 percent.The price elasticity of demand is:
A)1.5 and is elastic.
B)1.5 and is inelastic.
C)0.67 and is elastic.
D)0.67 and is inelastic.

Question

Quizplus · Accepted Answer

Price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. Using the information given in the question:

Percentage change in price = -50%
Percentage change in quantity demanded = 75%

Therefore, price elasticity of demand = (75/-50) = -1.5

Since the absolute value of elasticity is greater than 1, demand is considered elastic. Therefore, the best choice is A) 1.5 and is elastic.

If the Price of a DVD Decreases by 50 Percent,the