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

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is: % change in quantity demanded = elasticity * % change in price. Here, -0.06 * 50% = -3%, indicating a 3% decrease in quantity demanded.

Assume That the Price Elasticity of Demand for Petrol Is