Suppose the quantity of root beer demanded decreases from 105,000 litres per week to 95,000 litres per week when the price rises by 5 percent.The price elasticity of demand is
A)2.0.
B)0.5.
C)10.
D)0.02.
E)50.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: percentage change in quantity demanded divided by the percentage change in price. Here, the percentage change in quantity demanded is ((95,000 - 105,000) / 105,000) * 100 = -9.52%, and the percentage change in price is 5%. Thus, the elasticity is |-9.52% / 5%| = 1.904, which is approximately 2.0.

Suppose the Quantity of Root Beer Demanded Decreases from 105,000