Suppose that when the price of cereal rises 10 percent,the quantity demanded of cereal falls by 5 percent.Based on this information,what is the approximate price elasticity of demand for cereal?
A) 0.5
B)-0.5
C) 2.0
D)-2.0
E) 0

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, it is (-5%/10%) = -0.5, indicating that the demand for cereal is inelastic and decreases as the price increases.

Suppose That When the Price of Cereal Rises 10 Percent,the