A value of the absolute price elasticity of demand equal to 0.5 indicates that
A) a 5 percent increase in price leads to a 10 percent decrease in quantity demanded.
B) a 10 percent increase in price leads to a 5 percent decrease in quantity demanded.
C) a 0.5 percent increase in price leads to a 1 percent decrease in quantity demanded.
D) a 1 percent increase in price leads to a 5 percent decrease in quantity demanded.

Question

Quizplus · Accepted Answer

A value of the absolute price elasticity of demand equal to 0.5 indicates that a 10 percent increase in price leads to a 5 percent decrease in quantity demanded. This means that demand is relatively inelastic, as the change in price results in a smaller proportionate change in quantity demanded.

A Value of the Absolute Price Elasticity of Demand Equal