Assume that the price elasticity of demand for gasoline is -0.06.If the government tax causes the price of gasoline to increase by 50 percent, what will be the decrease in the quantity of gasoline demanded?
A)0.5 percent
B)3.0 percent
C)8.33 percent
D)50 percent

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is: % change in quantity demanded = elasticity * % change in price. Here, -0.06 * 50% = -3.0%.

Assume That the Price Elasticity of Demand for Gasoline Is