If the price elasticity of demand for a good is 2, then a 10 per cent increase in the price of that good ________ the quantity demanded by ________ per cent.
A) increases; 20
B) decreases; 20
C) increases; 8
D) decreases; 10
E) decreases; 2

Question

Quizplus · Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. If the elasticity is 2, a 10% increase in price leads to a 20% decrease in quantity demanded.

If the Price Elasticity of Demand for a Good Is