If the price of chocolate increases by 15 percent and the quantity demanded of chocolate declines by 5 percent, the price elasticity of demand ( )is 3.

Question

If the price of chocolate increases by 15 percent and the quantity demanded of chocolate declines by 5 percent, the price elasticity of demand (  )is 3.

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, we have:

- Percentage change in price = 15%
- Percentage change in quantity demanded = -5%

Therefore, the price elasticity of demand is (-5%/15%) = -0.33. Since this value is negative, we know that chocolate is a normal good (i.e. as the price increases, the quantity demanded decreases). Additionally, the absolute value of -0.33 is less than 1, which means that the demand for chocolate is inelastic (i.e. the percentage change in quantity demanded is less than the percentage change in price). Therefore, the statement given is false.

If the Price of Chocolate Increases by 15 Percent and the Quantity