At a price of $5/hour,Bob wants to hire three workers.When the price rises to $7/hour,Bob wants to hire only two workers.Bob's price elasticity of demand for workers is:
A) -0.83.
B) -1.20.
C) -0.33.
D) -0.40.
E) -0.10.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). The quantity demanded changes from 3 to 2 workers, a decrease of 33.33%, and the price increases from $5 to $7, an increase of 40%. Thus, the elasticity is -33.33% / 40% = -0.83.

At a Price of $5/hour,Bob Wants to Hire Three Workers