In September 2012, the average price of gasoline in the United States was $3.91 per gallon and consumers bought 5 percent less gasoline than they had during September 2011, when the average price was $3.66 per gallon. Based on these numbers, what was the price elasticity of demand for gasoline from September 2011 to September 2012?
A) -0.33
B) -0.76
C) -2.96
D) -6.75

Question

Quizplus · Accepted Answer

Price elasticity of demand = (% change in quantity demanded) / (% change in price)

Here, the price has increased from $3.66 to $3.91, which is a 6.83% increase ((3.91-3.66)/3.66).
The quantity demanded has decreased by 5%.

So, Price elasticity of demand = (-5%)/6.83% = -0.73
Rounding off to the nearest integer, we get -0.76 (Answer B) as the price elasticity of demand for gasoline from September 2011 to September 2012.

In September 2012, the Average Price of Gasoline in the United