If the price elasticity of demand for chicken is 2, then a 20% decrease in the price of chicken will lead to a:
A)10% decrease in the quantity demanded of chicken.
B)10% increase in the quantity demanded of chicken.
C)40% decrease in the quantity demanded of chicken.
D)40% increase in the quantity demanded of chicken.

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of 2, a 20% decrease in price will lead to a 40% increase in quantity demanded (20% * 2 = 40%).

If the Price Elasticity of Demand for Chicken Is 2