If a 10 percent increase in the price of a good leads to a 5 percent decrease in the quantity demanded of the good, the price elasticity of demand is elastic.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, it is 0.5 (5% / 10%), which indicates inelastic demand, not elastic, because the absolute value is less than 1.

If a 10 Percent Increase in the Price of a Good