The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range
A)has declined.
B)is of unit elasticity.
C)is inelastic.
D)is elastic.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the quantity demanded increased by 20% ([60-50]/50), and the price decreased by 10% ([90-100]/100). Since the percentage change in quantity demanded is greater than the percentage change in price, the demand is considered elastic.

The Price of Product X Is Reduced from $100 to $90