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, the percentage change in price is 15 percent and the percentage change in quantity demanded is -5 percent (since demand declines when price increases). Therefore, the price elasticity of demand is -5/15 = -1/3, which is not equal to 3. The question may have been asking for the absolute value of the elasticity, which would be 1/3, but the wording is unclear.

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