If quantity increases by 15 percent when prices decrease 5 percent,then elasticity for this product is _____
A)15.
B)10.
C)5.
D)3.
E)1.

Question

Quizplus · Accepted Answer

Elasticity is calculated as the percentage change in quantity divided by the percentage change in price.

Using the formula: 
Elasticity = (percentage change in quantity) / (percentage change in price)

We are given that quantity increases by 15 percent when prices decrease 5 percent.

Percentage change in quantity = 15 percent 
Percentage change in price = -5 percent (negative because of the decrease in price)

Elasticity = (15 percent) / (-5 percent) = -3

Since the elasticity is negative, this indicates that the product is price elastic, meaning that changes in price have a significant impact on the quantity demanded. The magnitude of the elasticity is important because it tells us how much of an impact changes in price will have on quantity demanded. A value of -3 indicates that for every 1 percent change in price, quantity demanded will change by 3 percent.

If Quantity Increases by 15 Percent When Prices Decrease 5