If the absolute value of the price elasticity of demand is 2,then a 15% increase in price causes a:
A) 30% increase in quantity demanded
B) 30% decrease in quantity demanded
C) 7.5% increase in quantity demanded
D) 7.5% decrease in quantity supplied
E) 30% increase in income

Question

Quizplus · Accepted Answer

If the absolute value of the price elasticity of demand is 2, it means that for every 1% change in price, the quantity demanded changes by 2%. Therefore, a 15% increase in price would result in a 30% decrease in quantity demanded (15% x 2). Option B is the only option that represents a decrease in quantity demanded, hence it is the correct answer.

If the Absolute Value of the Price Elasticity of Demand