If the price elasticity of demand for a good is 0.25, then a 20 percent decrease in price results in a
A)0.0625 percent increase in the quantity demanded.
B)4 percent increase in the quantity demanded.
C)5 percent increase in the quantity demanded.
D)80 percent increase in the quantity demanded.

Question

If the price elasticity of demand for a good is 0.25, then a 20 percent decrease in price results in a
A)​0.0625 percent increase in the quantity demanded.
B)​4 percent increase in the quantity demanded.
C)​5 percent increase in the quantity demanded.
D)​80 percent increase in the quantity demanded.

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of 0.25, a 20% decrease in price results in a 5% increase in quantity demanded (0.25 * 20% = 5%).

If the Price Elasticity of Demand for a Good Is