If the price elasticity of demand for a good is 6,then a 3 percent decrease in price results in
A)a 20 percent increase in the quantity demanded.
B)an 18 percent increase in the quantity demanded.
C)a 2 percent increase in the quantity demanded.
D)a 1.8 percent increase in the quantity demanded.

Question

Quizplus · Accepted Answer

The formula for price elasticity of demand is percentage change in quantity demanded divided by percentage change in price. So, if the price elasticity of demand is 6, a 3% decrease in price will result in a 6*3% = 18% increase in quantity demanded. Therefore, the correct answer is B, an 18% increase in quantity demanded.

If the Price Elasticity of Demand for a Good Is