In the figure above,when the price falls from $5 to $4,the price elasticity of demand is
A) 2.
B) 3.
C) 0.75.
D) 1.5.
E) 0.33.

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the price falls from $5 to $4, i.e. a 20% decrease in price. Let's say the quantity demanded increases from 100 to 130, i.e. a 30% increase in quantity demanded. 
Price elasticity of demand = (30/100)/(20/100) = 1.5. Therefore, the answer is (B).

In the Figure Above,when the Price Falls from $5 to $4,the