If the price elasticity of demand for a good is 2,then a 10 percent increase in the price of that good ________ the quantity demanded by ________ percent.
A) increases; 20
B) decreases; 2
C) decreases; 10
D) decreases; 20
E) increases; 8

Question

Quizplus · Accepted Answer

If the price elasticity of demand is 2, then a 10 percent increase in price will lead to a 20 percent decrease in quantity demanded (since the percentage change in quantity demanded is twice as large as the percentage change in price). Therefore, the correct answer is (D).

If the Price Elasticity of Demand for a Good Is