If the absolute price elasticity of demand is 2.5, a 10 percent increase in the price will cause
A) the quantity demanded to decrease by 2.5 percent.
B) the quantity demanded to decrease by 25 percent.
C) the quantity demanded to decrease by 4 percent.
D) the quantity demanded to decrease by 40 percent.

Question

Quizplus · Accepted Answer

The absolute price elasticity of demand measures the percentage change in quantity demanded in response to a percentage change in price. In this case, the elasticity is 2.5, meaning that a 10% increase in price will cause a 25% decrease in the quantity demanded (10% x 2.5 = 25%). Therefore, the correct answer is B.

If the Absolute Price Elasticity of Demand Is 2