If a 4 percent increase in the price of pepper results in a 1 percent decrease in pepper sales, what is the absolute value of the price elasticity of demand for pepper? Is it elastic or inelastic?
A) 4; elastic
B) 0.25; elastic
C) 4; inelastic
D) 0.25; inelastic

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is 1% / 4% = 0.25. Since the elasticity is less than 1, it is inelastic.

If a 4 Percent Increase in the Price of Pepper