If the absolute price elasticity of demand for good X is 0.5, when there is a 10 percent increase in price, we can conclude that quantity demanded
A) has fallen by 50 percent.
B) has fallen by 20 percent.
C) has fallen by 10 percent.
D) has fallen by 5 percent.

Question

Quizplus · Accepted Answer

The absolute price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of 0.5 and a 10 percent increase in price, the quantity demanded would fall by 5 percent (0.5 * 10% = 5%).

If the Absolute Price Elasticity of Demand for Good X