The price elasticity of demand for a given good is 2.3. This implies that if price
A)rises by 10 percent, quantity demanded falls 2.3 percent.
B)rises by 2.3 percent, quantity demanded falls 2.3 percent.
C)rises by 20 percent, quantity demanded falls 46 percent.
D)falls by 10 percent, quantity demanded falls 2.3 percent.
E)none of the above

Question

Quizplus · Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good, calculated as the percentage change in quantity demanded divided by the percentage change in price. A price elasticity of 2.3 means that for a 1% increase in price, the quantity demanded decreases by 2.3%. Therefore, for a 20% increase in price, the quantity demanded would decrease by 46% (20% * 2.3 = 46%).

The Price Elasticity of Demand for a Given Good Is