If the price elasticity of demand is 2 in absolute value, then when the price of Good X rises by 25 percent:
A) the quantity demanded of it rises by 50 percent.
B) the quantity demanded of it falls by 50 percent.
C) the quantity demanded of it rises by 12.5 percent.
D) the quantity demanded of it falls by 12.5 percent.

Question

Quizplus · Accepted Answer

Price elasticity of demand of 2 means that for every 1% increase in price, the quantity demanded decreases by 2%. Therefore, a 25% increase in price will lead to a 50% decrease in quantity demanded (25% * 2 = 50%).

If the Price Elasticity of Demand Is 2 in Absolute