Suppose the own price elasticity of demand for good X is −0.5,and the price of good X increases by 10 percent.We would expect the quantity demanded of good X to:
A) increase by 5 percent.
B) increase by 20 percent.
C) decrease by 5 percent.
D) decrease by 20 percent.

Question

Quizplus · Accepted Answer

The own price elasticity of demand formula is percentage change in quantity demanded divided by percentage change in price. With an elasticity of -0.5 and a price increase of 10 percent, the quantity demanded would decrease by 5 percent (-0.5 * 10% = -5%).

Suppose the Own Price Elasticity of Demand for Good X