If the price of the iPod falls by 3 percent and the price elasticity of demand for iPods is 2.0, then quantity demanded will fall by what percentage?
A) 5 percent.
B) 6 percent.
C) 0.6 percent.
D) 60 percent.

Question

Quizplus · Accepted Answer

The percentage change in quantity demanded will be twice the percentage change in price due to the price elasticity of demand being 2.0. Therefore, a 3 percent fall in price will result in a 6 percent fall in quantity demanded (2 x 3 = 6). Therefore, the best choice is B.

If the Price of the IPod Falls by 3 Percent