If the price elasticity of demand is equal to 4, a 1 percent increase in the price will cause quantity demanded to increase from 100 to 104 units.

Question

Quizplus · Accepted Answer

If the price elasticity of demand is 4, a 1% increase in price will cause a 4% decrease in quantity demanded (since the demand is elastic). Therefore, quantity demanded would go from 100 to 96 units, not 104.

If the Price Elasticity of Demand Is Equal to 4