If the elasticity of demand for good ALPHA is 2.0,
A)A 10% fall in the price of ALPHA will raise quantity demanded by 2%.
B)A price increase will raise total revenue for sellers.
C)A 17% increase in the price of ALPHA will lower quantity demanded by 17%.
D)A 10% rise in the price of ALPHA will lower quantity demanded by 20%.

Question

Quizplus · Accepted Answer

The elasticity of demand measures how quantity demanded responds to a change in price. If the elasticity is 2.0, a 1% change in price leads to a 2% change in quantity demanded in the opposite direction. Thus, a 10% rise in price would decrease quantity demanded by 20%.

If the Elasticity of Demand for Good ALPHA Is 2