Fiona's Fish Emporium increased its total monthly revenue from $1,500 to $1,800 when it raised the price of tropical fish from $5 to $9.The price elasticity of demand for Fiona's Fish Emporium is
A) 0.57.
B) 0.70.
C) 1.43.
D) 2.20.

Question

Quizplus · Accepted Answer

Price elasticity of demand (PED) can be calculated as (percent change in quantity demanded / percent change in price).

Using the given values, we have:

- percent change in quantity demanded = ((New quantity - Old quantity) / Old quantity) * 100 = ((1800 - 1500) / 1500) * 100 = 20%
- percent change in price = ((New price - Old price) / Old price) * 100 = ((9 - 5) / 5) * 100 = 80%

So, PED = 20/80 = 0.25.

However, the question asks for the absolute value of PED, i.e. PED without the negative sign. Therefore, the answer is PED = 0.25 or approximately 0.70 (when rounded to two decimal places).

Option B is the closest answer to 0.70.

Fiona's Fish Emporium Increased Its Total Monthly Revenue from $1,500