Suppose that the value of the price elasticity of demand for a product is 2 and its price increases by 16%.What will happen to the quantity demanded?
A)It will increase by 8%.
B)It will increase by 32%.
C)It will decrease by 8%.
D)It will decrease by 32%.
E)It cannot be determined without further information.

Question

Quizplus · Accepted Answer

The price elasticity of demand is 2, which means the quantity demanded changes by 2 times the percentage change in price. A 16% increase in price will lead to a 32% decrease in quantity demanded (16% * 2 = 32%).

Suppose That the Value of the Price Elasticity of Demand