Bailey's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased.What is the elasticity of demand facing Bailey's Barber Shop?
A)0.05
B)0.10
C)0.15
D)0.33
E)3.0

Question

Quizplus · Accepted Answer

The elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is -15% / 5% = -3.0.

Bailey's Barber Shop Knows That a 5% Increase in the Price