If the elasticity of demand for mothballs is 0.50, then moving along the demand for mothballs:
A)A 20% rise in the price of mothballs will lead to a 10% fall in the quantity of mothballs demanded.
B)A 10% rise in the price of mothballs will lead to a 20% fall in the quantity of mothballs demanded.
C)A 20% rise in the price of mothballs will lead to a 10% rise in the quantity of mothballs demanded.
D)A 10% rise in the price of mothballs will lead to a 20% rise in the quantity of mothballs demanded.

Question

If the elasticity of demand for mothballs is 0.50, then moving along the demand for mothballs:
A)​A 20% rise in the price of mothballs will lead to a 10% fall in the quantity of mothballs demanded.
B)​A 10% rise in the price of mothballs will lead to a 20% fall in the quantity of mothballs demanded.
C)​A 20% rise in the price of mothballs will lead to a 10% rise in the quantity of mothballs demanded.
D)​A 10% rise in the price of mothballs will lead to a 20% rise in the quantity of mothballs demanded.

Quizplus · Accepted Answer

The elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. With an elasticity of 0.50, a 20% increase in price leads to a 10% decrease in quantity demanded, which matches option A. This is because elasticity is calculated as the percentage change in quantity demanded divided by the percentage change in price, so a 0.50 elasticity means the quantity demanded changes by half the percentage amount of the price change.

If the Elasticity of Demand for Mothballs Is 0