If the price elasticity of demand for cigarettes is 0.4,
A)The demand is elastic.
B)A 10 percent increase in price will cause quantity demanded to fall by 40 percent.
C)The demand is inelastic.
D)A 5 percent decrease in price will cause quantity demanded to rise by 10 percent.

Question

Quizplus · Accepted Answer

A price elasticity of demand of 0.4 means that the percentage change in quantity demanded is less than the percentage change in price, indicating that demand is inelastic. This also means that a 10 percent increase in price would cause quantity demanded to fall by less than 10 percent.

If the Price Elasticity of Demand for Cigarettes Is 0