The price of apples falls by 5 percent and quantity of apples demanded increases by 6 percent. We conclude that the demand for apples is
A)perfectly elastic.
B)unit elastic.
C)elastic.
D)perfectly inelastic.
E)inelastic.

Question

Quizplus · Accepted Answer

When the price of apples falls by 5% and the quantity demanded of apples increases by 6%, we can determine the elasticity of demand through the following formula:

Elasticity of demand = (% change in quantity demanded) / (% change in price)

Using this formula, we can determine that the elasticity of demand for apples is:

Elasticity of demand = (6%) / (-5%) = -1.2

Since the elasticity of demand is greater than 1, we can conclude that the demand for apples is elastic.

The Price of Apples Falls by 5 Percent and Quantity