If the estimated price elasticity of demand for foreign travel is 4:
A)a 20% decrease in the price of foreign travel will increase quantity demanded by 80%.
B)the demand for foreign travel is inelastic.
C)a 10% increase in the price of foreign travel will increase quantity demanded by 40%.
D)a 20% increase in the price of foreign travel will increase quantity demanded by 80%.

Question

Quizplus · Accepted Answer

A price elasticity of demand of 4 means that a 1% decrease in price will result in a 4% increase in quantity demanded. Therefore, a 20% decrease in price will result in a 4 x 20 = 80% increase in quantity demanded.

If the Estimated Price Elasticity of Demand for Foreign Travel