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 inelastic.
B) -1.5 and is elastic.
C) -0.67 and is elastic.
D) -0.67 and is inelastic.

Question

Quizplus · Accepted Answer

Price elasticity of demand (PED) is calculated by the percentage change in quantity demanded divided by the percentage change in price. Using the given information:

PED = (% change in quantity demanded) / (% change in price)
PED = 75% / (-50%)
PED = -1.5

Since the absolute value of PED is greater than 1 (-1.5), the demand is elastic, meaning that consumers are responsive to changes in price. Therefore, a decrease in price leads to a proportionately larger increase in quantity demanded.

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