Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded
A)increased by 7 percent.
B)decreased by 7 percent.
C)decreased by 9 percent.
D)decreased by 1.75 percent.

Question

Quizplus · Accepted Answer

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of 3.5 and a price increase of 2 percent, the quantity demanded decreases by 7 percent (3.5 * 2%).

Suppose We Find That the Price Elasticity of Demand for a Product