Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded.Price elasticity of demand for X is
A)0.
B)1.
C)6.
D)36.

Question

Quizplus · Accepted Answer

When the price of good X increases by 6%, the quantity demanded of X decreases by 6%. Therefore, the price elasticity of demand for X can be calculated as:
% change in quantity demanded / % change in price
= (-6%) / (+6%)
= -1
The negative sign indicates that the change in quantity demanded is in the opposite direction of the change in price. Since the price elasticity of demand is a unitless measure, we can ignore the negative sign and say that the price elasticity of demand for X is 1. This means that the percentage change in quantity demanded is equal to the percentage change in price, which makes X have unit elastic demand.

Suppose There Is a 6 Percent Increase in the Price