A fall in the price of a good from $11.50 to $8.50 results in an increase in the quantity demanded from 19,200 to 20,800 units. The price elasticity of demand is
A)0.27.
B)3.75.
C)0.08.
D)8.0.
E)30.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). The percentage change in quantity demanded is ((20,800 - 19,200) / 19,200) = 0.0833, and the percentage change in price is ((8.50 - 11.50) / 11.50) = -0.2609. The elasticity is 0.0833 / -0.2609 = -0.319, which is approximately 0.27 when considering the absolute value.

A Fall in the Price of a Good from $11