Suppose that as the price of Y falls from $2.00 to $1.90,the quantity of Y demanded increases from 110 to 118.Then the price elasticity of demand is:
A) 4.00.
B) 2.09.
C) 1.45.
D) 3.94.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). The percentage change in quantity demanded is ((118-110)/110)*100 = 7.27%, and the percentage change in price is ((1.90-2.00)/2.00)*100 = -5%. Thus, the elasticity is 7.27% / -5% = -1.454, which is approximately 1.45 in absolute value.

Suppose That as the Price of Y Falls from $2