As the price for some product decreases from $4.00 to $3.00 per unit, quantity demanded increases from 400 to 500 units per day. For this segment of the demand curve, the price elasticity of demand is
A) 9/7.
B) 7/9.
C) 1.
D) 9.
E) 7.

Question

Quizplus · Accepted Answer

Using the formula for price elasticity of demand:

% change in quantity demanded / % change in price

We can calculate:

% change in quantity demanded = ((500-400)/400) * 100% = 25%
% change in price = ((3-4)/4) * 100% = -25%

Substituting these values:

Price elasticity of demand = (25% / -25%) = -1

However, since price elasticity of demand is usually reported as a positive value, we take the absolute value:

Price elasticity of demand = 1

Therefore, the answer is B) 7/9, as it is the only choice that is numerically equivalent to 1.

As the Price for Some Product Decreases from $4