If the price of coffee increases from $2.50 per cup to $3.00 per cup and the quantity demanded goes down from 120 cups per week to 115 cups per week, the absolute value of price elasticity of demand in that price range is approximately
A) 0.23.
B) 4.35.
C) 0.93.
D) 2.34.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). The percentage change in quantity demanded is ((115 - 120) / 120) * 100 = -4.17%. The percentage change in price is ((3.00 - 2.50) / 2.50) * 100 = 20%. The elasticity is |-4.17% / 20%| = 0.2085, which is approximately 0.23.

If the Price of Coffee Increases from $2