If the price elasticity of demand for a product is 2.5,then a price increase of 1.5 percent decreases the quantity demanded by
A) 1.55 percent.
B) 3.50 percent.
C) 5.00 percent.
D) 3.75 percent.
E) 1.00 percent.

Question

Quizplus · Accepted Answer

The formula for calculating the percentage change in quantity demanded is:
% Change in Quantity Demanded = Price Elasticity of Demand × % Change in Price
Plugging in the given values, we get:
% Change in Quantity Demanded = 2.5 × 1.5 = 3.75%
Therefore, a price increase of 1.5% will result in a decrease in quantity demanded of 3.75%. Thus, the correct choice is D.

If the Price Elasticity of Demand for a Product Is