If the price elasticity of demand is -4.0,a 5 percent decrease in price will increase quantity demanded by
A) 0.8 percent.
B) 1.25 percent.
C) 20 percent.
D) 80 percent.
E) 125 percent.

Question

Quizplus · Accepted Answer

The price elasticity of demand is -4.0, which means that a 1% decrease in price will lead to a 4% increase in quantity demanded. Therefore, a 5% decrease in price will lead to a 20% increase in quantity demanded.

If the Price Elasticity of Demand Is -4