Ed_t= - 5. This means that if A) P_tincreases by 5%, then Qd_t will decrease by 1% B) Qd_tincreases by 5%, P_t will decrease by 1% C) P_t increases by 1%, Qd_twill decrease by 5% D) P_t decreases by $1.00, Qd_t will decrease by 5 units

Question

Quizplus · Accepted Answer

The equation shows that a 1% increase in P_t leads to a 5% decrease in Qd_t. Therefore, if P_t increases by 5%, the decrease in quantity demanded will be 5% x 5 = 25%, or a decrease of 1%. Choice A is incorrect because it suggests that an increase in price will result in a decrease in quantity demanded, which is opposite to the law of demand. Choice B is incorrect because it suggests that an increase in quantity demanded will result in a decrease in price, which is opposite to the law of supply. Choice D is incorrect because it changes the pricing unit from a percentage to a dollar amount and does not account for the inverse relationship between price and quantity demanded.

Edt = - 5. This Means That If

Ed_t= - 5. This Means That If