If the price of gasoline goes up by 50% and the quantity demanded goes down by 25%, the absolute value of the price elasticity of demand is
A) 0.25.
B) 0.50.
C) 0.75.
D) 1.00.

Question

Quizplus · Accepted Answer

Price elasticity of demand (PED) = (% change in quantity demanded) / (% change in price)

Given that price of gasoline goes up by 50%, (% change in price) = 50%

And quantity demanded goes down by 25%, (% change in quantity demanded) = -25%

Now substituting these values in the PED formula, we get:

PED = (-25%) / (50%) = -0.5

Since PED is always positive, taking the absolute value of -0.5 gives us 0.5.

Hence, the absolute value of the price elasticity of demand is 0.5, which corresponds to choice (B).

If the Price of Gasoline Goes Up by 50% and the Quantity