If the elasticity of demand for Good A is -3,a 33 percent decrease in quantity demanded of Good A results from a(n)________ in the price of Good A.
A) 99 percent decrease
B) 99 percent increase
C) 11 percent decrease
D) 11 percent increase
E) 33 percent decrease

Question

Quizplus · Accepted Answer

According to the formula for elasticity of demand, a 1 percent increase in price will lead to a 0.33 percent decrease in quantity demanded. Therefore, a 11 percent increase in price will result in a 33 percent decrease in quantity demanded (11 x 0.33 = 3.63, which rounds to 3.6 or 3.7 percent, and 3.7/0.33 = 11.2, which rounds to 11 percent). Therefore, choice D is the correct answer.

If the Elasticity of Demand for Good a Is -3,a