If the price elasticity of demand is 0.6,then a 10 percent increase in the price of the good will lead to a ________ in the quantity demanded.
A)6 percent increase
B)6 percent decrease
C)0.6 percent increase.

Question

Quizplus · Accepted Answer

A price elasticity of demand of 0.6 indicates that demand is somewhat inelastic, meaning that a 10 percent increase in price will result in a proportionally smaller decrease in quantity demanded. Using the formula for price elasticity of demand, we can calculate that a 10 percent increase in price would lead to a:

% change in quantity demanded = (0.6) x (-10%) = -6%

Therefore, the quantity demanded would decrease by 6 percent, making choice B) the correct answer.

If the Price Elasticity of Demand Is 0