Egg producers know that the elasticity of demand for eggs is 0.1. If they want to increase sales by 5%, they will have to lower price by:
A) 0.1%.
B) 1%.
C) 5%.
D) 50%.

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is % change in quantity demanded / % change in price. With an elasticity of 0.1, to achieve a 5% increase in sales, the price must be reduced by 5% / 0.1 = 50%.

Egg Producers Know That the Elasticity of Demand for Eggs